College of Administrative and Financial Sciences
Assignment 2
Deadline: (End of Week 9) 31 /10/ 2020 @ 23:59
Course Name:
Student’s Name:
Accounting Information System
Course Code: ACCT 402
Student’s ID Number:
Semester: I
CRN:
Academic Year: 1441/1442 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: …… /5
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
● The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
● Assignments submitted through email will not be accepted.
● Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
● Students must mention question number clearly in their answer.
● Late submission will NOT be accepted.
● Avoid plagiarism, the work should be in your own words, copying from students
or other resources without proper referencing will result in ZERO marks. No
exceptions.
● All answered must be typed using Times New Roman (size 12, double-spaced)
font. No pictures containing text will be accepted and will be considered
plagiarism).
● Submissions without this cover page will NOT be accepted.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. Provide examples of business concerns describing the Preventive, Detective
and Corrective Action with reference to Internal Control.
(1.5 Marks)
2. A disaster recovery plan (DRP) is a documented process or set of procedures
to execute an organization’s disaster recovery processes and recover and
protect a business IT infrastructure in the event of a disaster. It is “a
comprehensive statement of consistent actions to be taken before, during
and after a disaster”.
Describe a Disaster Recovery Plan (DRP) for
Information Technology of a Saudi Business Concern.
(1.5
Marks)
3. Personal information about customers is collected, used, disclosed, and
maintained only in compliance with internal policies and external regulatory
requirements and is protected from unauthorized disclosure. With reference
to Privacy Concern how would you deal with SPAM and Identify Theft
problem of your business organization?
(2 Marks)
Chapter 7
Control and AIS
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-1
Learning Objectives
Explain basic control concepts and explain why computer control and security
are important.
Compare and contrast the COBIT, COSO, and ERM control frameworks.
Describe the major elements in the internal environment of a company
Describe the four types of control objectives that companies need to set.
Describe the events that affect uncertainty and the techniques used to identify
them.
Explain how to assess and respond to risk using the Enterprise Risk Management
(ERM) model.
Describe control activities commonly used in companies.
Describe how to communicate information and monitor control processes in
organizations.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-2
Internal Control
System to provide reasonable assurance that objectives
are met such as:
Safeguard assets.
Maintain records in sufficient detail to report company assets
accurately and fairly.
Provide accurate and reliable information.
Prepare financial reports in accordance with established
criteria.
Promote and improve operational efficiency.
Encourage adherence to prescribed managerial policies.
Comply with applicable laws and regulations.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-3
Internal Control
Functions
Categories
Preventive
General
Deter problems
Detective
Discover problems
Corrective
Overall IC system and
processes
Application
Transactions are
processed correctly
Correct problems
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-4
Sarbanes Oxley (2002)
Designed to prevent financial statement fraud, make
financial reports more transparent, protect investors,
strengthen internal controls, and punish executives who
perpetrate fraud
Public Company Accounting Oversight Board (PCAOB)
Oversight of auditing profession
New Auditing Rules
Partners must rotate periodically
Prohibited from performing certain non-audit services
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-5
Sarbanes Oxley (2002)
New Roles for Audit Committee
Be part of board of directors and be independent
One member must be a financial expert
Oversees external auditors
New Rules for Management
Financial statements and disclosures are fairly presented,
were reviewed by management, and are not misleading.
The auditors were told about all material internal control
weak- nesses and fraud.
New Internal Control Requirements
Management is responsible for establishing and
maintaining an adequate internal control system.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-6
SOX Management Rules
Base evaluation of internal control on a recognized
framework.
Disclose all material internal control weaknesses.
Conclude a company does not have effective financial
reporting internal controls of material weaknesses.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-7
Internal Control Frameworks
Control Objectives for Information and Related
Technology (COBIT)
Business objectives
IT resources
IT processes
Committee of Sponsoring Organizations (COSO)
Internal control—integrated framework
Control environment
Control activities
Risk assessment
Information and communication
Monitoring
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-8
Internal Control
Enterprise Risk Management Model
Risk-based vs. control-based
COSO elements +
Setting objectives
Event identification
Risk assessment
Can be controlled but also
Accepted
Diversified
Shared
Transferred
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-9
Control Environment
Management’s philosophy, operating style, and risk
appetite
The board of directors
Commitment to integrity, ethical values, and
competence
Organizational structure
Methods of assigning authority and responsibility
Human resource standards
External influences
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-10
ERM—Objective Setting
Strategic
High-level goals aligned with corporate mission
Operational
Effectiveness and efficiency of operations
Reporting
Complete and reliable
Improve decision making
Compliance
Laws and regulations are followed
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-11
ERM—Event Identification
“…an incident or occurrence emanating from internal or
external sources that affects implementation of strategy
or achievement of objectives.”
Positive or negative impacts (or both)
Events may trigger other events
All events should be anticipated
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-12
Risk Assessment
Identify Risk
Identify likelihood of risk
Identify positive or negative impact
Types of Risk
Inherent
Risk that exists before any plans are made to control it
Residual
Remaining risk after controls are in place to reduce it
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-13
ERM—Risk Response
Reduce
Implement effective internal control
Accept
Do nothing, accept likelihood of risk
Share
Buy insurance, outsource, hedge
Avoid
Do not engage in activity that produces risk
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-14
Event/Risk/Response Model
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-15
Control Activities
Policies and procedures to provide reasonable
assurance that control objectives are met:
Proper authorization of transactions and activities
Signature or code on document to signal authority
over a process
Segregation of duties
Project development and acquisition controls
Change management controls
Design and use of documents and records
Safeguarding assets, records, and data
Independent checks on performance
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-16
Segregation of Accounting Duties
No one employee should be given too much responsibility
Separate:
Authorization
Approving transactions and decisions
Recording
Preparing source documents
Entering data into an AIS
Maintaining accounting records
Custody
Handling cash, inventory, fixed assets
Receiving incoming checks
Writing checks
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-17
Information and Communication
Primary purpose of an AIS
Gather
Record
Process
Summarize
Communicate
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-18
Monitoring
Evaluate internal control framework.
Effective supervision.
Responsibility accounting system.
Monitor system activities.
Track purchased software and mobile devices.
Conduct periodic audits.
Employ a security officer and compliance officer.
Engage forensic specialists.
Install fraud detection software.
Implement a fraud hotline.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-19
Segregation of System Duties
Like accounting system duties should also be separated
These duties include:
System administration
Network management
Security management
Change management
Users
Systems analysts
Programmers
Computer operators
Information system librarian
Data control
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
7-20
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