Accounting Systems, Internal Controls, and Ethics
Accounting Information Systems
ACCOUNTING SYSTEMS, INTERNAL CONTROLS, AND ETHICS
Prepared for the course team by
Vimlesh B. Narayan
Unit 1 Contents
Unit 1 Contents 2
Concept Map 3
Learning Outcomes 4
1.1 Introduction 5
1.2 Accounting System Design 6 System Objectives and Design Factors 6 Designing the System 8
1.3 Internal Control Systems 17 Objectives of Internal Control Systems 17 Structure of Internal Control Systems 18 Why You Should Consider the Components? 21 Internal Control Principles and Limitations 25
1.4 Control over Revenue and Receipts 31 Internal Control Objectives and Strategies 32 Combined Document Flows and Related Activities 35
1.5 Control over Purchases, Inventories, and Payments 41 Internal Control Objectives and Strategies 41 Combined Document Flows and Activities 45
1.6 Control over Payroll 51 Internal Control Objectives and Strategies 51
1.7 Control over Fixed Assets 57 Internal Control Objectives and Strategies 57
1.8 Other Controls 61 Budgetary Control 61 Information Systems 61
1.9 Ethics, Business, and the Accounting Profession 65 Defining Ethics 65 Need for Ethics 67
1.10 Summary 79 Minute Paper 80 Minute Paper 80
Glossary 82
Readings 103 Reading 1: Selling on Credit & Receivables 103 Reading 2: Control over Sales of Inventories 106 Reading 3: Receipts 110 Reading 4: Purchases and Inventory Control 114 Reading 5: Payments 122 Reading 6: Control over Payroll 123 Reading 7: Control over Non-Current Assets 130
References 133
Further Reading 134
Concept Map
This is a diagrammatic representation of what you will be learning in this unit. It shows the links between the learning objectives and key concepts.
[pic]
Figure 1: Unit Concept Map
Learning Outcomes
The following list of learning outcomes describes what you will be able to achieve after completing this unit. They are broken into three groups: Conceptual outcomes refer to concepts and other
ACCOUNTING SYSTEMS, INTERNAL CONTROLS, AND ETHICS
Prepared for the course team by
Vimlesh B. Narayan
Unit 1 Contents
Unit 1 Contents 2
Concept Map 3
Learning Outcomes 4
1.1 Introduction 5
1.2 Accounting System Design 6 System Objectives and Design Factors 6 Designing the System 8
1.3 Internal Control Systems 17 Objectives of Internal Control Systems 17 Structure of Internal Control Systems 18 Why You Should Consider the Components? 21 Internal Control Principles and Limitations 25
1.4 Control over Revenue and Receipts 31 Internal Control Objectives and Strategies 32 Combined Document Flows and Related Activities 35
1.5 Control over Purchases, Inventories, and Payments 41 Internal Control Objectives and Strategies 41 Combined Document Flows and Activities 45
1.6 Control over Payroll 51 Internal Control Objectives and Strategies 51
1.7 Control over Fixed Assets 57 Internal Control Objectives and Strategies 57
1.8 Other Controls 61 Budgetary Control 61 Information Systems 61
1.9 Ethics, Business, and the Accounting Profession 65 Defining Ethics 65 Need for Ethics 67
1.10 Summary 79 Minute Paper 80 Minute Paper 80
Glossary 82
Readings 103 Reading 1: Selling on Credit & Receivables 103 Reading 2: Control over Sales of Inventories 106 Reading 3: Receipts 110 Reading 4: Purchases and Inventory Control 114 Reading 5: Payments 122 Reading 6: Control over Payroll 123 Reading 7: Control over Non-Current Assets 130
References 133
Further Reading 134
Concept Map
This is a diagrammatic representation of what you will be learning in this unit. It shows the links between the learning objectives and key concepts.
[pic]
Figure 1: Unit Concept Map
Learning Outcomes
The following list of learning outcomes describes what you will be able to achieve after completing this unit. They are broken into three groups: Conceptual outcomes refer to concepts and other
References: FIA Council, (2000), Fiji Institute of Accountants: Code of Ethics, FIA, Suva, Fiji, pp 4–7. Grynberg R., et.al., (2002), Crises: Collapse of the National Bank of Fiji, Crawford House Publishing, Adelaide, Australia, p95. Gul, F.A.et.al., (1994), Theory and Practice of Australian Auditing, (3rd edition), (Chapter 14), Thomas Nelson Australia. pp 359, 360, 364–367. McNally Q., et.al., (2001), Accounting Principles and Practice, (Chapter 5), Pearson Education, NZ. Narayan V., (2007), AFF01 Basic Accounting A Course-Book, (Unit 3), USP, Suva. TVNZ, AAP, Heads may roll over Ansett fiasco, (2001), Retrieved 20/11/07, from http://tvnz.co.nz/view/page/425822/36435 Further Reading Capital Markets Development Authority: http://www.cmda.com.fj/ Adams, K., (1997), “Chapter 1,” Internal Controls and Auditing, Prentice Hall Australia Pty Ltd. Grynberg R., et.al., (2002), Crises: Collapse of the National Bank of Fiji, Crawford House Publishing, Adelaide, Australia. ----------------------- [1] Cushing B, Romney M., 1990, Chapter 1: Accounting Information Systems: An Overview”, Accounting Information Systems: A Comprehensive Approach, Addison – Wesley Publishing Company Inc, USA [2] McNally Q., et.al., 2001, “Chapter 5,”Accounting Principles and Practice, Pearson Education, NZ. p194. [3] A few of these have been sourced from McNally Q., et.al., 2001, “Chapter 5,”Accounting Principles and Practice, Pearson Education, NZ. p194-195. [6] Gul, F.A.et.al., 1994, Theory and Practice of Australian Auditing, Thomas Nelson Australia [7] http://www.coso.org/publications/executive_summary_integrated_framework.htm [8] Gul, F.A.et.al., 1994, Theory and Practice of Australian Auditing, Thomas Nelson Australia [11] http://www.coso.org/publications/executive_summary_integrated_framework.htm [12] Davey H., et.al., 2003, Accounting Fundamentals: an introduction for New Zealand students, Dunmore Press Ltd, New Zealand [13] Adapted from Bazley, M., et.al., 2004, Contemporary Accounting, Thomson, Australia. p19. [16] Much of the information is sourced from: Grynberg R., et.al, 2002, Crises: Collapse of the National Bank of Fiji, Crawford House Publishing, Adelaide, Australia. [18] Grynberg R., et.al., 2002, Crises: Collapse of the National Bank of Fiji, Crawford House Publishing, Adelaide, Australia. p95. [19] Marshall, D., et.al., 2005, Accounting: what the numbers mean, McGraw Hill Australia. pp 280 – 281. [20] Marshall, D., et.al., 2005, Accounting: what the numbers mean, McGraw Hill Australia. Pp 282 – 283 [21] Latin for “something for something”; indicates a more-or-less equal exchange or substitution of goods or services