Summary: Lecture 4 (Ais)

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• 1 Lecture 4 (AIS)

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• What are the three basic business activities in the acounting information system in the expenditure cycle?

  1. Ordering
  2. Receiving and storing goods
  3. Paying

• What are the three basic functions of the accounting information system in the expenditure cycle?

  1. Caturing an dprocessing data about business activities
  2. Storing and organizing that data to support decision making
  3. Providing controls: ensure reliability of data & safeguard resources

• Give a description of the purchase system

  1. Purchase requisition
  2. Purchasing
  3. Receiving/Inspection
  4. Accounts Payable
  5. Cash Disbursements

• The primary objectives of the ordering goods process

  1. Accurately and efficiently process orders
  2. Prevent stockouts
  3. Esure that the company receives quality gods at the lowest price

• The primary objectives of the receiving process

  1. Verify the receipt of ordered inventory
  2. Safeguard inventory

• What are the risks and the controls of the receiving process?

  Risk1: Receiving unordered goods
  Controls: Require receiving to verify existence of valid purchase order
  
  Risk2: Making errors in counting goods
  Controls: Document employee performance, Incentives for accurate counts, supervision
  
  Risk3: Theft of inventory
  Controls: Physical access controls, document all transfers of inventory, periodic counts of inventory and reconciliation of physical counts to records

• What are the primary objectives of the payment process?

  1. All invoices are valid and accurate
  2. All invoices are paid
  3. Cash is safeguarded
  4. Records are accurately maintained

• What are the risks and controls of the payment process?

  Risk1: Failing to catch errors in vendor invoice
  Controls: Double-check invoice accuracy (3-way-match), training of accounts payable staff 
  
  Risk2: Paying for goods not ordered or received
  Controls: Only pay invoices supported by the original purchase order and receiving report(3-way-match)
  
  Risk3: Paying the same invoice twice
  Controls: Only pay invoices supported by the original voucher package, cancellation of voucher package upon payment.

• What are the primary objectives of the accounting process?

  1. To register correct info on accounts
  2. To safeguard cash

• What are the risks and controls of the accounting process?

  Risk1: Recording and posting errors in accounts payable
  Controls: Various data entry and processing edit controls
  
  Risk2: Misappropriating cash, checks or Electronic Funds Transfers
  Controls: Restrict access to bank checks, Seggregation of duties of accounts payable and cashier, reconciliation of bank account by someone independent of cash disbursement process, check protection measures, regular review of electronic funds transfer transactions.