IAAUDCIS CHAPTER 6: Transaction processing and financial reporting systems overview

Question 1

Economic event that affects the assets and equities of the firm

Answer 1

Financial Transactions

Question 2

Time lag between the due to credit relations with suppliers

Answer 2

Expenditure Cycle

Question 3

Time lag between the due to credit relations with customers

Answer 3

Revenue Cycle

Question 4

Used to capture and formalize transaction data needed for transaction processing

Answer 4

Source Documents (Manual Systems Accounting Record)

Question 5

The result of transaction processing

Answer 5

Product Documents (Manual Systems Accounting Record)

Question 6

A product document of one system that becomes a source document for another system

Answer 6

Turnaround Documents (Manual Systems Accounting Record)

Question 7

A record of chronological entry

Answer 7

Journals (Manual Systems Accounting Record)

Question 8

Specific classes of transactions that occur in high frequency

Answer 8

Special Journals (Manual Systems Accounting Record)

Question 9

Nonrecurring, infrequent and dissimilar

Answer 9

General Journal (Manual Systems Accounting Record)

Question 10

A book of financial accounts

Answer 10

Ledger (Manual Systems Accounting Record)

Question 11

Shows activity for each account listed on the chart of accounts

Answer 11

General Ledger (Manual Systems Accounting Record)

Question 12

Shows activity by details for each account type

Answer 12

Subsidiary Ledger (Manual Systems Accounting Record)

Question 13

Audit Trail

Answer 13

Source Document - Journal - General Ledger - Financial Statements
Financial Statements - General Ledger - Journal - Source Document

Question 14

Generally contains account data (General Ledger and Subsidiary File)

Answer 14

Master File (Computer Files)

Question 15

A temporary file containing transactions since the last update

Answer 15

Transaction File (Computer Files)

Question 16

Contains relatively constant information used in processing (tax tables, customer addresses)

Answer 16

Reference File (Computer Files)

Question 17

Contains past transactions for reference purposes

Answer 17

Archive Files (Computer Files)

Question 18

is a documentation technique to represent the relationship between entities in a system

Answer 18

Entity Relationship Diagram (ERD)

Question 19

Represents the numerical mapping between entities (one to one, one to many, many to many)

Answer 19

Cardinalities

Question 20

Uses symbols to represent the processes, data sources, data flows and entities in a system.

Answer 20

Data Flow Diagrams (DFD)

Question 21

Illustrates the relationship among processes and the documents that flow between them

Answer 21

Documents Flowcharts

Question 22

Used to represent the relationship between the key elements – input sources, programs and output products of computer systems

Answer 22

System Flowcharts

Question 23

illustrates the logic used in programs

Answer 23

Program Flowcharts

Question 24

• client based server
• process transactions real time
• relational database tables
• high degree of process integration & data sharing
• mainframe based
• uses batch processing

Answer 24

Modern Systems

Question 25

- mainframe- based applications - batch oriented - uses flat files for data storage - uses hierarchical and network databases - single user environment data storage (discourages information integration)

Answer 25

Legacy Systems

Question 26

Transaction - Update Program - Master - Backup Program - Backup Master - Recovery Program - Master

Answer 26

Database Backup Procedures

Question 27

- a group of similar transactions that are accumulated over time and then processed together. - independent from one another - time lag exists between the event and the processing

Answer 27

Batch Processing

Question 28

Keystroke - Edit Run - Sort Run - Update Run - Backup Procedure

Answer 28

Steps in Batch Processing/Sequential File

Question 29

source documents are transcribed by clerk for processing later

Answer 29

Keystroke

Question 30

identifies clerical errors and places them into an error file

Answer 30

Edit Run

Question 31

places transaction file in the same order as the master file using a primary key

Answer 31

Sort Run

Question 32

changes the value of appropriate fields in the master file to reflect the transaction

Answer 32

Update Run

Question 33

original master continues to exist and a new master file is created

Answer 33

Backup Procedure

Question 34

Advantages of Batch Processing

Answer 34

- can increase efficiency - provides control over the transaction processing

Question 35

- process transactions individually at the moment the economic event occurs - have no time lag between the economic event and the processing - require greater resources than batch processing since it requires dedicated processing capacity however, cost differentials are decreasing - often have longer systems development

Answer 35

Real-Time systems

Question 36

Sequential Codes Block Codes Group Codes Alphabetic Codes Mnemonic Codes

Answer 36

Data Coding Schemes

Question 37

hub connected to other systems sources of input for other systems flows as feedback provides data to MRS & FRS

Answer 37

General Ledger System

Question 38

principal FRS file based on chart of accounts

Answer 38

General Ledger Master File

Question 39

used for comparative history file

Answer 39

General Ledger History File

Question 40

all journal vouchers of the current period

Answer 40

Journal Voucher File

Question 41

journal vouchers of past period audit trails

Answer 41

Journal Voucher History File

Question 42

financial data by responsibility center for MRS

Answer 42

Responsibility Center File

Question 43

Budget data by responsibility centers for MRS

Answer 43

Budget Master File

Question 44

Listing of transactions Allocation of expenses to cost enters Comparison of account balances from prior periods

Answer 44

General Ledger Analysis

Question 45

Analysis of sale Analysis of cash Analysis of receivables

Answer 45

Managerial reports

Question 46

Transaction Authorization Segregation of duties Access Controls Accounting Records Independent Verification

Answer 46

GL/FRS Control Issues

Question 47

Details of each journal voucher posted to the G/L

Answer 47

Journal Voucher Listing

Question 48

The effects of journal voucher postings on G/L accounts

Answer 48

General Ledger Change Report

Question 49

Format used to produce Web Pages

Answer 49

HTML: Hyper Text Markup Language

Question 50

meta-language for describing markup languages

Answer 50

XML: eXtensible Markup Language

Question 51

XML-based language for standardizing methods for preparing, publishing and exchanging financial information (Financial Statements)

Answer 51

XBRL: eXtensible Business Reporting Language

Question 52

incorrect taxonomy results in invalid mapping that may cause material misrepresentation of financial data

Answer 52

Taxonomy Creation

Question 53

ensure that appropriate taxonomy and tags have been applied

Answer 53

Validation of instance documents

Question 54

impact on auditor responsibility as a consequence of real-time distribution of financial statements

Answer 54

Audit Scope and timeframe