Page 272 - Accounting Information Systems

C H A P TER 5 The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures 243

The Reengineered System
The reengineered system addresses many of the operational weaknesses associated with the automated
system. Specifically, the improvements in this system are that (1) it uses real-time procedures and direct
access files to shorten the lag time in record keeping, (2) it eliminates routine clerical procedures by dis-
tributing terminals to user areas, and (3) it achieves a significant reduction in paper documents by using
digital communications between departments and by digitally storing records. These operational improve-
ments, however, have the following control implications.

SEGREGATION OF DUTIES. This system removes the physical separation between authorization
and transaction processing. Here, computer programs authorize and process POs as well as authorize and
issue checks to vendors. To compensate for this exposure, the system provides management with detailed
transaction listings and summary reports. These documents describe the automated actions taken by the
system and allow management to spot errors and any unusual events that warrant investigation.

ACCOUNTING RECORDS AND ACCESS CONTROLS. Advanced systems maintain accounting
records on digital storage media, with little or no hard-copy backup. Sarbanes-Oxley legislation requires
organization management to implement adequate control security measures to protect accounting records
from unauthorized access and destruction.

Summary

The chapter examined procurement procedures involving the 3. The areas of exposure and the control techniques that
acquisition of raw materials and finished goods. Because most reduce these risks.
organizations conduct these activities on a credit basis, the in-
The chapter examined the impact of technology on items
formation system needs to be designed to properly recognize
1, 2, and 3 in the preceding list. From this perspective, we saw
and record obligations as they arise and to discharge them
that automated systems use computers to replicate traditional
when they come due. Two expenditure cycle subsystems ac-
manual tasks. Reengineered systems, however, involve and
complish these tasks: the purchases system and the cash dis-
require new and innovative ways of dealing with traditional
bursements system. This chapter focused on the following
problems. Any technological solution carries control implica-
areas:
tions. Computers remove a fundamental separation of func-
1. The processes of each subsystem and the flow of infor- tions between authorizing and processing transactions. Also at
mation between them. risk is the integrity of accounting records. To control these
2. The documents, journals, and accounts needed to pro- risks, systems must be designed to provide users with docu-
vide audit trails, maintain historical records, and support ments and reports that permit independent verification and
internal decision making and financial reporting. support audit trail needs.

Key Terms

actual cost inventory ledgers (222) open AP file (223)
AP pending file (221) open purchase order (PO) file (218)
AP subsidiary ledger (223) open purchase requisition file (230)
blind copy (221) open vouchers payable (AP) file (232)
cash disbursement vouchers (223) purchase order (218)
cash disbursements journal (227) purchase requisition (218)
check register (227) receiving report (221)
closed AP file (239) receiving report file (221)
closed purchase order (PO) file (218) standard cost system (222)
closed voucher file (227) supplier’s invoice (223)
inventory subsidiary file (234) valid vendor (218)