Introduction
According to the specific scenario of Karla Kay plc, the following three sections of report will explain the new sales and sales return system, identity the principal risks and the methods to address those risks, describe the external auditors’ work in the system. The objective of investing the new information system is eliminate the risks of errors and fraud, then the cost of external audit will decrease in the next year.
The new sales system & sales return
Begin with the description of main steps, there are four processes: the receipt of order, the despatch of goods, the recording of the sale and subsequent receipt of payment.
The receipt of orders from KK 's customers:
Process:
The system according to the standard has been
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After customers submit their orders, they need pay it first, because goods cannot be despatched without payment. In the case the customers who permitted to pay by credit,
The principal risks
INHERENT RISK
The new management accounting system uses a computer, and the computer system is a multi-machine network operation, which exists, hackers through illegal means to enter the system, steal the stored information. And if some people have a password system, you can also enter the system, modify, and delete data. The actual data or by the operating system input, due to the possible presence of human operator error, the operator may be present operational errors, leading to discrepancies in data entry and the actual data(Sridharan, 2007)
CONTROL RISK
Due to the external auditing based on the internal audit information that can reduce the detailed testing and external auditors are short-staffed, they have limited authority to look up every data and time limit on discover the errors and fraud.
If company faced workforce shortages in a special period, it will occurred some temporary workers who disappear in final. Given the company 's past experience, there may be some people for personal gain, with unauthorized modification of the original data, fraud to obtain
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Firstly, external auditors need inquiry the tone of the top, because it can affect the culture, ethical behaviors and management of company, and also have an influence on completing expected value and internal budget. The auditors and the company negotiated the audit objectives, including the focus of audit content. The company authorized to audit staff, through a dedicated data port on the system to do real-time monitoring. We found the problem, real-time notification of the Board of Directors. Besides, auditors should estimating the significance and likelihood of occurrence of the risks that mentioned in the last part. Auditors can separately establish a risk control model based on the type of transaction and project data may exist for projects focusing on monitoring. As for the control activities, auditors should check the accuracy and completeness of transactions in information processing and comparing actual finance to budget. When data is present and anticipated significant differences, the company needs to inform the auditor investigation. During the planning phase, called by the auditors customers ' financial information, analyze the customer 's financial status, risk may exist to predict. Entry tickets for all of the company and the project should be documented, to ensure that all are kept in the company safe. For the number of items and bills, funds and stocks, the staff has
Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
To counter this problem, computer assisted audit techniques have been developed. These systems are able to provide a more in depth analysis of the utilized billing systems. Computer assisted audit techniques also enable highly efficient assessment of transactions. By utilizing this system, an auditor could gain a clearer picture of the revenue reporting mechanisms that are being utilized by the business office. Once the information is derived, however, its interpretation, while simpler, will still require an individual that is knowledgeable in regard to the revenue cycle
The user may then walk through the revenue cycle by entering sales orders, sending customers invoices, and entering the receipt of payment into the system. All of these steps are neatly organized in order in the software window. Example:. For example, if a user needed to enter the sale of a product on credit to a customer, if the customer has already been entered into the system and the inventory item is already set up to be tracked by the system, the user would need to enter the customer and what was sold and any additional information which differs from defaults. If the sale was preceded by a sales order, the product information can simply be imported from the sales order.
Auditing as a profession as evolved drastically over decades and as time has passed auditing activities has expanded from performing specific assurance activities for management, to assisting and advising management with their specific business activities. The Institute of Internal Auditors define internal auditing as ‘”…an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.’ (Institute of Internal Auditors, 2013) Through this definition it can be explained why auditors can be seen as the ‘eyes and ears’ of management. Concentrating specifically on the principles of Governance, the usage of Internal Auditing Standards, the Current Role of Internal Auditing in SA, reviewing current crisis, the importance of Internal Auditing to management is evident.
The ITGC regularly handle program changes, development, and access as well as basic computer operations. A poorly designed IT framework and accessibility protocols increase the company’s susceptibility to internal and external attacks, which result in the loss valuable financial information or its utilization to commit and conceal fraud. In asset misappropriation for example, an individual with access to the company’s accounting software has the opportunity to commit and conceal fraud. For example, Wayland Manufacturing Company’s accounting department oversees the maintenance of the Accounts Payable and Purchases general ledgers. Therefore, Newbaker is responsible for recording invoices and cash disbursements. Therefore, he has the accessibility to modify the company’s vendor list to include fictitious vendors that increase the likelihood of payment for fictitious invoices (Fraud Risk Assessment n.d.) (Eikel 2008) (Arens, Elder, & Borsum
However, according to Agency theory, agent has the duty to act in the best interests of the principal, but in order to reduce the risk that managers might undertake risky decisions, boards should monitor and control the agent’s behavior. In addition, the risk are treated by internal audit as monitorial or manageable may not be documented and assessed, which is increasing the cost of company(Spira & Page, 2003).
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
ABSTRACT: The quantity of accounting fraud cases keeps on rising. Fraud is a consistent thing that will reliably be around, and in a bigger number of routes than just a single. An extensive apportionment of organizations out there fighting fraud, either from within the organization, or from outside the organization. Knowing how to manage this is essential for an organization to be productive over an extended period of time. The investigation regarding the matter of accounting fraud will utilize sources from the web and the DeVry School Library.
I am interested in conducting research and teaching in managerial accounting, auditing and assurance services and accounting information systems. In particular, I am interested in exploring the role of accounting information systems in decision making, internal control, and auditing. In order to gain an appreciation of these and related issues, it is essential for me to have a strong grounding accounting, accounting information systems, information technology, managerial accounting, as well as gain a general economic and management perspective.
Accounting dates back as far as first centuries, is the language of business. As everything has gone through many changes, accounting has also changed many times through out the centuries. It went from the use of abacus to the most advanced softwares, and computers. With these drastic improvements nowadays accounting, financial accounting and management are facing big challenges. From the presentation of the reports to communication to the users, investors, and owners, the accounting field has gained totally a new shape from two decades ago. Today with the dynamic change in every aspect of life, the accounting field has to act fast and be able to adapt these new changes and challenges in order to survive.
The audit risk is consists of three elements which are inherent risk, control risk and detection risk. The audit model is important to the audit process. The audit risk model provides the basic for the current emphasis on the risk-based audit approach and it assists the auditor in determining the scope of auditing procedures for a particular account balance or class of transactions. Based on the assessed risk, the auditor may determine whether the use of more tests of control or substantive procedures is appropriate to address the
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.
The major characters of the tradition audit are all information what is needed by auditors are on the paper and the manual calculators and without high communication technology. Auditors usually were limited by the place in the paper time. When a several people are working on the same auditing project for a client with offices in cities across the country, even worldwide, it takes a lots all time those auditors get the information which they need from the client, even there is risk paper information disappear for many reasons. on the another hand, mail paper information increase the auditing cost. The mistake caused by the manual calculators inevitably, no matter how fixed auditors concentrate on recalculate is, after all auditors are human. The global business become major in the modern business world, some example, several auditors who are in different locations are working a same auditing project, or auditors are in different city even country with the client, when there is issue among these auditors or between auditors and client, they only can communicate with each other by phone or be together and have meeting. Phone call can not make sure information been watched in the same time when the voice is talking about the issue, but having a meeting takes time and money make all people together, it increases auditing cost.
Nowadays with the implementation of new emerging technologies, the way businesses keep this financial information has become computerised. At the moment businesses use computers with a computerised accounting system in order to perform many other new activities than what they were able to do in the past. Businesses can access financial information from different department in the organisation, access to the information through computers and find financial data very fast, being more efficient. (Beliss, 2013)
The function of accounting information system transforms from simple storage to a supportive tool of decision-making, producing high quality information and detailed analysis, bringing about real economic benefits. However, it also challenges the skills and ethics of modern accountants, putting forward the new demand for the professionals who use the accounting information system. As a result, two capabilities are recognized to be essential for the professionals. One is the competency, it lists out a pattern of knowledge used in the job as well as be aware of the link between information systems and decision-making. On the other hand is the ability of analyzing and diagnosing, which is good at problem solving. Another challenge is about ethical issue, requiring integrity and confidentiality as a professional quality of an accountant. To conclude, the accounting information system integrating the information, analyzing and supporting decision-making will become more important in the forming of a company’s strategy. Understanding the structure of accounting information system would lead to a competitive advantage over competitors in the