Accounting: Final Exam Essay
Accounting: Final Exam
For each of the following course objectives, explain in 200-400 words what you learned in this course and how you could apply your learning of this course objective to your personal life or career. Refer to the syllabus to assist you in understanding what material was covered under each objective.
1) CHANGING DYNAMICS OF ACCOUNTING
The steps of accounting cycles are revenues, expenditures, conversion/ production, financing, fixed assets, and financial reporting. Revenues most often occur as the result of the selling of a service or product. These transactions are recorded in the form of cash receipts and sales orders. Expenditures are a result of the materials and labor need to generate revenues. For example a dry cleaning business would need certain chemicals, bags and hangers for cleaned clothes, and employees to operate the business. Conversion represents the production or the good or service sold by the company. In other terms the time/ cost to produce and market the good or service. Financing is also known as and outstanding debt, such as stocks or any outstanding bonds. The fixed asset details the purchase, disposition, and depreciation of company assets.
Once all journal entries have been posted and all accounts closed a trial balance is prepared and is used to identify errors and eventually prepare the financial reporting for the company. Accounting systems have become more automated and the need for human intervention is becoming more limited. Automation of these systems does allow for increased efficiency and accuracy and has allowed manual accounting task to be performed more quickly. Human intervention is necessary though to ensure the data being entered is correct. Human intervention can also help to identify errors that may have been made in the initial inputting of information. As technology evolves it is near impossible to not have some interaction with the internet. Companies often have multiple locations as the internet opens the company to customers they could not otherwise reach.
While the internet opens companies for increased commerce, there is also increased risk to the company’s data. We have recently heard in the news how the State of South Carolina’s Department of Revenue’s systems were hacked and thousands of tax payer’s personal information such as social security numbers were stolen. (http://www.postandcourier.com/apps/pbcs.dll/section?Category=pc160442). To ensure company security, many it department limit users ability to access certain websites and download programs, games, and even pictures.
2) INFORMATION SYSTEMS INFRASTRUCTURE
(to earn full credit meet word count of at least 200 words) Accounting Information Systems (AIS) is what business use to collect, manage, and report financial information. AIS is a mix of people, procedures, raw data, software, and control. Internal controls are specifically vital as they work to maintain the integrity of data being entered and reported as well as protocol to protect sensitive data. A company’s internal controls must also meet or exceed SOX in order to be in compliance. Companies employee a mix of general and application controls to meet these requirements. Application controls include financial application controls to detect errors such as incorrect keying of raw data. This could also include pre-coding bank transactions so that deposits are accidently recorded as withdrawals and vise versa.
General controls include items such as segregation or duties, documenting and processing data, reconciliation of accounts, and even restricting access to certain systems to the employee who needs the system to perform their job. AIS can include not only the internal controls one thinks of (such as segregation of duties) but also systems restrictions and requiring key card access for entry to various sites and departments. These items protect stored data and also allow for tracking of individuals needing this type of access. As accounting systems become increasingly automated, firms are seeking individuals who have not only the understanding of GAAP and SOX, but also solid understanding of IT controls and process.
3) DATA MANAGEMENT AND INTEGRATION
(to earn full credit meet word count of at least 200 words) I found week three to be the most challenging for me. While I regularly use excel, learning correct terminology and how to build a database was especially difficult. While some terms were easy to grasp (such as field, record, and queries) truly understanding how tables and data relate to each other was difficult to grasp. When I realized that a primary key is unique and is defined in one table and that primary key would be the foreign key on another table and is what is used to join the tables, building a database became clearer. Because the internet has changed the face of business, some companies find integrating reports from various divisions challenging.
Software often has to be developed or modified so all reporting divisions have access to properly report expenditures and revenue. The data must also be organized and maintained in a logical way. Maintenance of the data is as important as the reporting. Without proper maintenance, future queries will not reflect the true numbers. Good maintenance and relation within a database also allows for companies to easily query the wealth of information within their own records to gain additional insight into buying trends, possible room for more efficient production, and quick review of possible errors.
4) BUSINESS MODELING PROCESSES AND SYSTEM DESIGN
(to earn full credit meet word count of at least 200 words) SDLC is the process which should ensure a quality product. SDLC stands for Software Development Life Cycle. The SDLC includes planning, system analysis and design, development, testing, implementation, and maintenance. In planning the company would identify the need, set a timeline for completion and outline the recourses needed for completion. The planning phase would also include what the company hopes to accomplish with new software. After the need is identified, analysis of current procedures and software is performed. This would include documentation of current procedures and identifying gaps in the system and best practices. This is most often accomplished by reviewing requirements of each job, speaking with managers and employees.
Once these needs and shortfalls are identified, then the development process begins. The software should then been tailored/ purchased with the identified need and the company’s current shortfalls in mind. Once this is completed companies will often test the new software either in theory or in a small division of the company. For instance due to system and accounting needs my company recently developed a new ordering system. Rather than deploying the new system nationwide, one smaller district is being used to test and improve. After this is completed my company will move onto the implantation process. Implementation includes not only actually beginning to use new software but also transferring of old data to the new system, training employees on new procedures and how to use the new software. Once a system is implemented it should be maintained. Companies should continually review for issues and correct and adjust the system as needed. AIS should cover all levels of the company’s financial reporting needs
5) INFORMATION SYSTEMS AND AUDITING
(to earn full credit meet word count of at least 200 words) The auditing of a company’s information system is vital to ensuring the company’s records are accurate and well protected. Also, it is imperative that the information systems are compliant with GAAP and SOX. SOX was enacted to address possible weakness on company’s internal controls and as a result of the scandal at companies Enron and Worldcom. Upon examination of why these companies failed, it was determined that the internal controls that should have been in place to ensure proper and truthful reporting were lacking. The internal controls govern the integrity of the data collected, processed, and disclosed on financial reports. SOX requires external/ independent auditors to test whether a company’s internal controls and procedures are sufficient and report this on the company’s financial report.
To prevent CFOs and CEOs from claiming no knowledge of misreporting, SOX now requires that these individuals identify their knowledge of the company’s finances, how it was reported, documentation of their own involvement and the internal controls used to govern this. SOX also provides providing criminal and financial penalties for individual non-compliance. . In order to complaint with GAAP a company’s policies should include organizational structure outline, descriptions of transaction types, summaries of revenue, as well as a list of unacceptable practices. While SOX was enacted to prevent fraudulent reporting some smaller companies do struggle with ensuring they are compliant with the internal controls outlined.