Exam (elaborations)
IS AUDIT- Ch 6- Transaction Processing and Financial Reporting Systems (Final) (1)
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- Chapter 5: Time Value Of Money
IS AUDIT- Ch 6- Transaction Processing and Financial Reporting Systems (Final) (1)
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IS AUDIT- Ch 6- Transaction Processing andFinancial Reporting Systems (Final)
Financial transaction (what it is and 3 types of transaction cycles) - ANS--Affects assets and
equities of the firm, is reflected in its accounts, and is measured in monetary terms
3 transaction cycles:
1) Expenditure cycle
2) Conversion cycle
3) Revenue cycle
1) Expenditure cycle - ANS--Business activities begin with the acquisition of materials, property,
and labor in exchange for cash
Major subsystems of the expenditure cycle - ANS--Purchases/Accounts Payable System
-Cash disbursements system
-Payroll system
-Fixed asset system
2) Conversion cycle (and it's two major subsystems) - ANS--Where raw materials are converted
into finished goods
-Composed of two subsystems:
1) The Production system
2) The Cost Accounting system
The Production System - ANS--Involves planning, scheduling, and control of the physical
product through the manufacturing process
-Includes determining raw materials requirements, authorizing the work to be performed and the
release of raw materials into production, and directing the movement of the WIP
The Cost Accounting System - ANS--Monitors the flow of cost information related to production
-Information produced is used for inventory valuation, budgeting, cost control, performance
reporting, and management decisions
3) Revenue cycle - ANS--Firms sell their finished goods to customers through this cycle
-Involves processing cash/credit sales, and the receipt of cash following a credit sale
Primary subsystems of the revenue cycle - ANS-1) Sales order processing
2) Cash receipts
, Manual System Accounting Records: Documents (3 types) - ANS-1) Source documents
2) Product documents
3) Turnaround documents
Source documents - ANS--used to capture and formalize transaction data needed for
transaction processing
Product documents - ANS--the result of transaction processing
Ex. a payroll check to an employee is a product document of the payroll system
Turnaround documents - ANS--product document of one system that becomes a source
document for another system
-contains important information about a customer's account to help the cash receipts system
process the payment
-"Remittance advice"
Computer-Based Systems - ANS--The audit trail is less observable than in traditional manual
systems
-Data entry and computer programs are the physical trial
-Data are stored in magnetic files
4 types of magnetic files - ANS-1) Master file
2) Transaction file
3) Reference file
4) Archive file
1) Master file - ANS--generally contains account data
-data values are updated from transactions
Ex. general ledger and subsidiary ledgers
2) Transaction file - ANS--a temporary file of transaction records used to change or update data
in a master file
Ex. sales orders, inventory receipts, and cash receipts
3) Reference file - ANS--stores data that are used as standards for processing transactions
Ex. payroll program may refer to a tax table to calculate the proper amount of withholding taxes
for payroll transactions
4) Archive file - ANS--contains records of past transactions that are retained for future reference
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