BACHELOR OF ACCOUNTANCY (HONS)

ACCOUNTING INFORMATION SYSTEMS

(AIS615)

PBL PACKAGE: CASES

PREPARED BY:

GROUP 3 (NACAB5A)

NAME MATRIC NO
PUTRI KHAIRUNISA NABILA BINTI RODZALI 2019551587
SITI NUR NAJLAA SALIHAH BINTI A.RAHMAN 2017372783
NUR FARHANA BINTI MOHAMAD RAFI 2016815148
LIYANA IZYAN BINTI ZAINAL ABIDIN 2017525427
CHE MASHETAH BINTI MOHAMMAD ADNAN 2017146939

PREPARED FOR:

MADAM WAN NORASIAH BINTI WAN NORDIN

DATE OF SUBMISSION:

16TH JULY 2021

Table of content PAGE
1.0. PBL Session 1 : Revenue Cycle
1.1 Data Flow Diagram 2
1.2 Difficulties In Using Application E-Wallet in Malaysia 3
2.0. PBL Session 2 : Expenditure Cycle
2.1 Weaknesses and Improvement in Alvin`s Expenditure Cycle 5
2.2 How IT Development can be integrated in Control Procedures 8
2.3 Describe Document.
2.3.1 Purchased order 9
2.3.2 Receiving Report 9
2.3.3 Sales Invoice 9
2.3.4 Packing Slip 9
2.3.5 Picking Ticket 10
2.3.6 Bill of Lading 10
2.3.7 Credit Memo 10
2.3.8 Remittance Advice 10
2.3.9 Cash Flow Budget 11
2.3.10 Back Order 11
3.0. PBL Session 3 : Payroll Cycle
3.1 Internal Control Weaknesses and Improvement in Payroll System 12
3.2 Benefit of Cloud based Payroll for Business 14
3.3 Possible Risk of Non-Cloud Payroll System Transaction 16
4.0. PBL Session 4 : Production Cycle
4.1 Weaknesses and Improvement on Present Production Scheduling and Its Work 17
Centre
4.2 Discuss How Big Data Analytic Can Used to Improve Production 20
5.0. PBL Session 5 : General Ledger and Reporting System
5.1 THREAT 1: Errors in updating the general ledger because of inaccurate/incomplete 21
journal entries or posting of journal entries 23
5.2 THREAT 2: Loss or unauthorized disclosure or alteration of financial data 25
5.3 THREAT 3 : Loss or destruction of the General Ledger

1
 1.0. PBL Session 1: Revenue Cycle

1.1 Data Flow Diagram

Inquiries Inventory
1.0 Sales Customer
Respond to inquiries
Order
Orders
Entry

1.1 Take
Supplier Order

Inventory 1.2 Check

Inventory
Availability

Acknowledgement Picking Ticket

1.3 Approve Warehouse
Customer Invoices Credit

Picking Ticket 2.0

2.1 Pick & Shipping
Pack

3.0
Billing

2
 1.2 Difficulties in Using Application E-Wallet in Malaysia

Question:

Quick and easy, E-Wallet is one of the best 21st century invention that allows people to make
payment in a single click. However, under certain circumstances, the users might have
difficulties in using the application in Malaysia. Discuss this situation.

Answer:

A e-wallet also known as digital wallet refers to an electronic device, online service, or software
program that allows one party to make electronic transactions with another party bartering digital
currency units for goods and services. This can include purchasing items online with a smartphone or
using a computer to purchase goods or services. Money can be deposited into the e-wallet prior to
any transactions. An individual's bank account can be linked to the e-wallet. Payment through e-
wallet has the advantage of ease, flexibility, and protection. Users might also have their driver's
license, loyalty card and other important documents or cards stored within the wallet.

However, under certain circumstances, the customers would possibly have difficulties by using
the e-wallet in Malaysia. There are restricted wide variety of retails who accepts the payment from a
digital wallet in Malaysia. Although there’s individuals who prefers cashless method but there are
numerous outlets that do not offer the cashless method, the retails favour to use debit or credit cards
instead of via electronic wallet or online transfer and. And the smaller retailers or street vendors
always prefers cash than other payment method especially e-wallet because they need quick access to
daily cash at hand. The smaller retailers must pay their supplier or vendor who only want the cash
instantly.

The security of your smartphone or mobile device is dependent on the settings you use. Most
people in Malaysia have the misconception that there are unsafety or risks by using the smartphone
to pay for purchases which makes them reluctant to reveal their financial information. These
negative perception towards technology also known as techno phobia. Techno phobia is also one of
the reasons that makes it difficult for users in Malaysia to use e-wallet. People scared that the devices
can be hacked and the thief can easily access their bank accounts and personal information. If you
don’t have your device protected with some type of password, then someone could steal your device
and potentially access the funds in your bank account or credit cards. There are definite security
advantages to consider which make an e-wallet a beneficial technology, though it requires
responsible management of it to maximize them.

3
 A digital wallet requires for your mobile device with internet connection. One of the major
reasons that makes the users have difficulties in using e-wallet is poor network coverage. Although
Malaysia is a well-developed country, it cannot be denied that there are a lot of parts in Malaysia that
has poor internet coverage in the certain area. This can be especially problematic if you are traveling
abroad or in smaller towns or villages with a lack of banking system or other payment options. One
reliable thing about physical cash is that unless it is torn or burnt, it rarely fails whereas an app on the
phone might lag when there’s patchy internet connection or even fail. Without a stable internet
connection, there will be difficulties in using e-wallet broadly in Malaysia. When that happens, and
you are left without any other forms of payment and will be stranded. This could be a problem as the
usage of e-wallet is directly proportional to the usage of internet. As you are dependent on your
phone for all your on-the-move transactions, losing it can prove to be a double whammy.

Moreover, the disadvantage that an electronic wallet requires you to have a charged device to
have it operate. You need to keep your phone constantly charged. If the phone dies on you, and
you’re all out of electrical plugs or power banks that can be a real headache. To carry out a
transaction, you’ll have to make sure there is enough battery life left on your phone. Some people
especially the elders might think that carrying a traditional wallet is easier than depending on phone
to pay for transaction by always making sure that there’s enough battery life left on the phone. If
you’re carrying a traditional wallet, you won’t need to worry about how much battery life is left on
your phone.

Besides, another major reason that makes difficult to use e-wallet in Malaysia is the lack of
user’s knowledge on technology. This might also be attributed to the lack of enough information on
the usage of the platform. Although the illiteracy level in Malaysia is relatively low compared to
other countries, yet many Malaysians especially the elderly finds it difficult to use the technology to
their benefit. In this case, users may find it difficult to use e-wallet due to its complicated functions.
The lack of technical knowledge to customers could be a major hold back for Malaysia to fully
utilize usage of e-wallet broadly throughout the country. Much as customers prefer to use the system,
they have little information concerning its safety, but they go ahead and use it anyway because of its
positive effects like that of being flexible and convenience, in addition to its easiness to use while
making payments to points of sale because it also saves a great deal of their time.

4
 In a nutshell, the reasons stated can be a major contributing factor that can hold back the
utilization of e-wallet broadly throughout Malaysia. These electronic wallet advantages and
disadvantages show that this technology makes it faster and easier to complete a transaction.
Although there are some accessibility issues to consider, for the most part, the use of a digital wallet
is a convenient option for many people.

2.0. PBL Session 2: Expenditure Cycle

2.1 Weaknesses and Improvement in Alvin`s Expenditure Cycle

Question:
Describe (5) weaknesses that exist in Alvin’s expenditure cycle and make suggestions for
improvements using a two column approach. (15 marks)

Answer:

Weaknesses Suggestions for Improvements

1. Weakness: The authorization need for document of
Raw materials are removed from the materials requisition contains the production
storeroom only upon written or oral order number’s date of issue and the bill of
authorization by a production materials, the part number of quantities of
supervisor. all necessary raw materials.
Any subsequent transfers of raw materials
Explanation: throughout the factory are documented on
Oral authorizations are not proper in move cards, which identify the parts being
inventory control. Without proper transferred, the location to which they are
approval and authorization of transferred, whom the item being
production order will affect threat transferred, and time of transfer.
for the management such as to be In additional, any movement and usage of
over or underproduction of specific raw materials should use bar-coding to
items. provide opportunity to improve the
efficiency and accuracy of these material
handling activities.
5
2. Weakness: The person in charge in the storeroom need
No perpetual inventory records to correctly counting the quantity received
are kept. Hence, the storeroom clerk and maintaining accurate perpetual
does not keep records for goods inventory records. This is to ensure
received or issued. company pays only for goods actually
received.
Explanation:
Without receiving records document
for every delivery, they would not
know the details of the goods
received, who was receiving the
goods and quality of goods received.
At the end, they probably to make
mistakes in counting items received
3. Weakness: There are differences between purchase
The storeroom supervisor matches requisition and material requisition.
the quantities in hand against a Purchase requisition is the most proper
predetermined reorder level. The document to enter reorder number of
supervisor enters the part number item, descriptions, quantity, and price of
on a materials requisition list that each item requested from supplier instead of
is sent to the account payable clerk. material requisition.

Explanation:
Materials requisition authorizes the
removal of the necessary quantity of
raw materials from the storeroom to
the factory location where they will
be used. While, the purchase
requisition is to identifies the
requisitioned, specifies delivery
location and date needed, identifies
the item number, descriptions,
quantity, and price of each item
requested may suggest a supplier.
6
4. Weakness: Alvin Inc. cannot select a supplier by just
The account payable clerk prepares referring to the last supplier. A proper
a purchase order for each item on evaluating supplier need to be done
the list and mails it to the supplier periodically to meet the preferable price,
from whom the part was last quality of materials and also to ensure the
purchased. dependability in making deliveries. A list of
potential alternatives suppliers for each
Explanation: item also need to be maintained, in case
By applying this method, it may the primary supplier is out of stock of a
effect in high cost, low quality, or needed item.
delay delivery.
5. Weakness: Suggestion:
The clerk counts all items and When a delivery arrives, the receiving clerk
verify that the counts agree with the should better compare the supplier’s
quantities of the bill of lading. packing slip with reference on the purchase
order number. The receiving clerk should
Explanation: check on the goods delivered by check on
Bill of lading is not the proper the quantity and type of goods ordered are
document to be used as reference tally with what stated in purchase order.
on verifying the goods counts. Before routing the inventory to warehouse
or storeroom, the receiving clerk also should
examine each delivery for signs of obvious
damage. It is important to have packing slip
and purchase order form as reference in
counting goods received for accuracy
control.

7
 2.2 How IT Development can be integrated in Control Procedures

Question:

Describe how IT development can be integrated in these control procedures (5 marks)

Answer:

The company may implement the ERP system. The system can be arranged for restriction of
access to the information that are needed for performing assigned functions only. For example, the
receiving department employees could not create a purchase order and see the ordered quantity of the
material.

Next, the system also can automatically maintain the perpetual inventory records. Periodic
physical counts of inventory will continue to be necessary. However, any discrepancies with the
recorded amounts will be investigate.

In addition, the system can automatically assign numbers to all documents. Therefore, the
documents are pre-numbered and accounted for. Sequence check can automatically be performed on
all electronic documents assigned numbers by the system.

The company also should adopt either Materials Requirements Planning (MRP) or Just in Time
(JIT) inventory in order to improve the efficiency in the process of ordering materials. Next, the
digital signatures and digital time stamps also can be used. It can be used in order to verify the
authenticity of all the electronic documents.

Lastly, in the aspect of inspection, the comments by inspectors should be entered via online
terminals. Therefore, all the comment can easily to be access if want to refer it back for the future
use.

8
 2.3 Describe Document.

2.3.1 Purchased order

A purchase order is an official document that buyers send to sellers to document the sale of products
and services to be delivered at a late date.

This allows buyers to place orders with suppliers without immediately making payment. The seller
uses POs as a way to offer buyers credit without risk because the buyer is legally obligated to pay for
products and services when they’ve been delivered.

2.3.2 Receiving Report

A receiving report is used to document the contents of a delivery to a business. The form is filled out
by the receiving staff of the business accepting the delivered goods.

2.3.3 Sales Invoice

A sales invoice is an essential and common document used by all kinds of companies. Companies
use sales invoices to inform customers of the amount they owe in exchange for goods or services that
were sold. A sales invoice should include which items the customer purchased, how many of the
items were purchased, any discounts received and the total amount owed.

2.3.4 Packing Slip

A packing slip is a document that describes the contents of a shipment to a customer. The packing
slip contains a separate line item for each item shipped. Each line item states the product number,
product description, and unit quantity shipped. A packing slip may be used by the recipient to verify
the contents of a delivery.

9
 2.3.5 Picking Ticket

A picking ticket is a list used to gather items to be shipped from a warehouse. The ticket contains the
item number and item description, as well as the location code for the bin in which it is stored, the
quantity to be picked, and the customer order number. Picking tickets are useful for organizing the
picking of inventory for customer orders in the most efficient manner possible.

2.3.6 Bill of Lading

A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity and
destination of the goods being carried. A bill of lading also serves as a shipment receipt when the
carrier delivers the goods at a predetermined destination. This document must accompany the
shipped products, no matter the form of transportation, and must be signed by an authorized
representative from the carrier, shipper and receiver.

2.3.7 Credit Memo

A credit memo is a contraction of the term "credit memorandum," which is a document issued by the
seller of goods or services to the buyer, reducing the amount that the buyer owes to the seller under
the terms of an earlier invoice. The credit memo usually includes details of exactly why the amount
stated on the memo has been issued, which can be used later to aggregate information about credit
memos to determine why the seller is issuing them.

2.3.8 Remittance Advice

A proof of payment document sent by a customer to a business. Generally, it's used when a customer
wants to let a business know when an invoice has been paid. The use of this document can be
considered a best practice, since it prevents the recipient of a payment from needing to contact the
sender to discuss what was included in the payment.
10
 2.3.9 Cash Flow Budget

Often referred to as a cash budget or a cash flow, the cash flow budget allows a company to keep on
top of cash income and outgoings over time.

Cash flow budgets differ from profit and loss accounts as they take into account things like
inventory, debt, and new equipment, which is why they are vital even for a highly profitable business
to map out.

2.3.10 Back Order

A backorder is an order for a good or service that cannot be filled at the current time due to a lack of
available supply.

The backorder is an indication that demand for a company's product outweighs its supply. They
may also be known as the company's backlog.

The nature of the backorder and the number of items on backorder will affect the amount of time
it takes before the customer eventually receives the ordered product. The higher the number of items
backordered, the higher the demand for the item.

11
 3.0. PBL Session 3: Payroll Cycle

3.1 Internal Control Weaknesses and Improvement in Payroll System

Question:

Discuss five (5) internal control weaknesses that exist in the payroll system of the company and
suggest the improvement that can be implemented. Your answer should be written using the
following format:

Answer:

Weaknesses Improvements

1) The employees manually record their hours The company should provide a new system for
worked on time sheets. Based on the the time attendance such as fingerprints. There
weakness, the employee might manipulate for if the employees do not come on time,
their time sheet by asking their friends to fill other employees or friends cannot help them
up the time sheet for them in case they are because they will not be able to use the
coming late to work or they can fill up the time fingerprint attendance system to clock in and
correctly even they coming late. out of work each day.
2) During payroll processing, the individual The company should lock personnel records
employee wage rates are manually pulled from and payroll at all times as unauthorized access
the personnel file based on the employee is not available. The personnel documents are
identification number. Based on the issue kept online using a password to prevent
anyone can easily access the personnel file and anyone from manipulating the records of any
will manipulate the records which is supposed other employee and also to avoid unauthorized
to be private and confidential. record adjustment such a rate of salaries.
3) The payroll clerk manually prepares checks The company should have task isolation. One
for each employee’s approved time sheet. individual, for preparing the payroll, one for
From these sentences, its show that no checker and approve the transaction and then
segregation of duties and it will lead to the another generate payments, thus minimizing
mismanagement or manipulation of the tasks. the chances of fraud if numerous people do so.
In others word, it’s will lead to an increasing If there are not enough workers in smaller
of frauds. business to adequately divide roles, require
someone who checks the payroll and
authorized before the payments are processing

12
 to workers.

4) The payroll clerk then updates the payroll The company should have an internal checker
register and sends a copy of the payroll before payroll clerk submit the transaction to
register to the accounts payable clerk who others department. Others consider the
updates the accounts payable ledger. After paychecks requiring not only one approval for
that, the payroll clerk sends a payroll summary the paychecks of an employee, but its need at
to the general ledger and forwards all least two approvals one from the supervisors
paychecks to the cash disbursement and the other from the higher level of
department. In these cases will cause the management. These help to reduce the risk of
payroll clerk will alter the pay rates. bribery as pay rates are shifting.
5) The accounts payable clerk uses the verified The company should have an internal and
list to update the accounts payable ledger, external auditor conducting a regular audit of
while the general ledger clerk uses the list to the compensation system to ensure that payroll
reconcile against the summary report. From transactions are properly measured those
these sentences can cause a conflict of interest workers still work at the company that time
and the employee can manipulate the data. records are properly obtained.

13
 3.2 Benefit of Cloud based Payroll for Business

Question:

Capturing and maintaining accurate time and attendance data of employee in this dynamic
environment is quite a challenge nowadays. Discuss the benefits of cloud based payroll for
business.

Answer:

Recently, cloud computing has been an ordinary option for a business to conduct
their operations. Human resources department are the one that monitor and carry out payroll for all
of the businesses’ employees. So, payroll can also be considered to be conducted using cloud
computing. There are many advantages that we can gain by implementing cloud computing. They
take advantages of the bandwidth of the modern global telecommunication network to enable
employees to use a browser to remotely access software, data storage device, hardware and entire
application environment. In a simple word, cloud computing is using a browser/internet to store
and access programs and data, replacing physical storage in computer’s hard drive to keep
those programs and data.
One of the benefits of cloud-based payroll is cost and time saving. The company can save cost
required on physical documentation such as papers, ink etc. For an example, company shall send
copies of timesheet to the HR department, account payable department etc. in order to settle
payroll matters. Instead of having multiple that must be sent to each department, the
company can generate central site that accumulate all documents required by each department. Cost
of delivery, papers and ink can be cut there.
Other than cost saving, cloud-based payroll is also fast and easy to obtain. With payroll software
that lives in the cloud, businesses don’t have to dedicate IT resources to maintaining or supporting
the software. There is no installation required, and data and functionality are available upon login,
accessible from anywhere, and natural disasters like floods or fires have limited to no impact on
accessibility.
Next is timely payment. The talking point about the human resource department of any
organization is ensuring a fruitful experience for the employees, and this comes with accurate and
timely salary pay-out. Late or inaccurate salary calculations have an uncanny ability to distract the
employee and cause restlessness on the floor. So, when we have timely payments, a company will
not have any worried for delay payment to employees as everything has been automatically set on
what time and to whom salary will pay. When the payroll department automates the salary pay off to

14
the employees on-time it will increase their trust, motivate them to work for an organization with a
positive mindset.
By using cloud also, the data needed are always available regardless of the working hour. It
doesn’t matter what time of day or night you work, your data and processes are always available in
the cloud. Hence, it offers more flexibility for working hours, and increasing efficiency since people
will have access on the data outside working hours, as long as they have sufficient internet
connection. By using cloud-based payroll also make employees untethered from the desk. Cloud-
based payroll software provides access to your payroll on the go, whether you're at a conference, out
to lunch, away on vacation, or in a seminar, and you won’t have to miss any payroll deadlines.
Employees will face less difficulties to carry out their work. Cloud-based payroll is also containing
more security. Guard against data loss without any complicated server backup schedules, aging
equipment, or IT staff because payroll is securely backed up in the cloud. Payroll information needs
to be kept on hand for years, and cloud-based software makes storage and access easy.

Others is the easier reporting. Cloud analytics applied to the cloud based payroll system of the
business helps them to slice dice real time date based on any area in the system and get instant
results. Which means there is no delay in the provision of information. As soon as data is collected.
It is sent to wherever is the needed across the network. Real time data make it much easier to
generate the report that are needed to produce by regulation as it guarantees that information is up to
date and accurate. This also helps to prepare the company for more relevantly.

15
 3.3 Possible Risk of Non-Cloud Payroll System Transaction

Question:

Explain briefly any two (2) possible risks that associated with non-cloud based payroll system
transaction.

Answer:

One of the possible risks that business may encounter when using non-cloud based payroll
system transaction is the data are vulnerable towards external factors such as losing data due to theft,
natural disasters and the incompetence of the drive used. We can control the internal factor to
prevent any data loss that will bring more troubles, such as regularly upgrade the software security,
hiring an IT supervisor to monitor the availability of the data and ensure all the systems are carefully
backed up, but we have no control against the natural disasters and others.

The second risk that associated with non-cloud-based payroll system is the Security. The payroll
system houses all sorts of sensitive information on both the business and the employees’ financial
details. Thus, the organization needs to know what security protocols they have in place as it is
important to have both good technology and sound payroll procedures in place.

The third risk is key personnel risk, nowadays many organizations leave the payroll within one
department of an organization for a few people only. If only people who are involved with the
payroll activity leave the company, the probability that the payroll process falls by the wayside will
be increasing. The organization needs to have a better plan for the handover of the information
required to keep payroll functions in play.

16
 4.0. PBL Session 4: Production Cycle

4.1 Weaknesses and Improvement on Present Production Scheduling and Its Work Centres

Question:

Discuss three (3) weaknesses in AB’s present production scheduling and three (3) weaknesses
in its work centres and explain the potential risk exposures posed by the weaknesses. Suggest
relevant six (6) improvements that can be used to address the weaknesses identified earlier.
Answer:

Weaknesses Improvement
1) No purchase requisition was provided from 1) Harry should know that system first checks
Harry. This weakness is shown in scenario when inventory on hand sufficiency. All transaction
Harry personally contact supplier by only refer to must properly record and authorized before send
the recommended supplier file. This weakness out order to supplier to performed effective and
will cause products will not meet customer efficient business activities. Proper segregation
requirements for quality, durability, and of duties should be enforced so that product can
functionality. Another scenario that show this meet customer requirement for quality,
weakness is when Harry make decision when he durability, and functionality to minimizing
finds that the inventory insufficient, he straight product cost. An independent party should count
away call supplier. By doing this, will be threats the inventory and investigate discrepancies to
that can happen such as invalid master data. avoid missed out data and important document.
2) Next scenario is when Harry finds that the 2)To improve this weakness, they have to be
inventory in insufficient only then he contacts to more accurate production planning, including
supplier. This will cause over and under accurate current sales forecasts and inventory
production. Refer to scenario, they are using data. They must perform regular collection of
Just-In-Time production planning, However, data on production performance to adjust
without proper production cycle or step it will production schedule. This weakness can be
occur more threats. No purchase requisition, no improving when proper authorization of
overhead and raw materials cost include in Harry production orders and restriction of access to
scheduling. production scheduling. This will achieve
objectives to provide accurate cost data about
products for use in pricing and product mix
decisions.

17
3) Next scenario that shows weakness is when 3)To improve this weakness, data processing
Harry only sign the delivery note without further integrity controls and monitor supplier
checking the materials only based on recommend performance. The delivery note need to authorize
file. He hands over the invoice to the account before hands over the invoice to account
department for clearance without authorization department. Segregation custody with receiving
from anyone. Later this will cause inaccurate of inventory need to be done. Even though
cost data because there may be where the supplier is from recommend file, harry should
materials received were not tally with invoice not only rely on that to avoid misappropriate of
and delivery note. This action of him also will data.
cause misappropriate of information & data.
4) Prepare material requisition note authorizing 4)When production is initiated, the issuance of a
the inventory storeroom to release raw materials materials requisition triggers a debit to work in
for use of production process without inventory process and credit to raw materials inventory.
control clerk sign. No tags and bar codes are Raw materials needs are determined by
used to check inventories and fixed asset. This exploding the bill of materials to determine
will be the potential risk exposure because it will amount needed for current production. Materials
cause disruption of operations because of loss of requisition must be signed and verify from
asset, mis-stated financial data also potential inventory clerk because the inventory clerk will
under production of inventory. This will result to verify the production numbers, date of issue ,
loss sales and customer dissatisfaction. part numbers and quantities of raw materials
needed before pass to production supervisor.
5) After completed job ticket is issued by Kamal, 5)On account department, all data files and key
he transfers directly the job ticket via computer master files should be backed up regularly.
system to the cost accounting section of the Account department should parity checks,
accounting department. Accounting department acknowledge messages and controls total should
then makes no other check or reviews. This is a be used to ensure transmissions accuracy.
potential risk exposure because data received Account department must collect and process the
will be inaccurate. It will diminish effectiveness information used to calculate the inventory and
of production scheduling and undermines cost of goods sold value that will appear in
management’s ability to monitor and control organizations financial.
operations. Loss or alteration of data could cause
errors in external & internal reporting.

18
6) Submit timecard to the payroll section of the 6)This weakness is show inappropriate allocation
accounting department for salary and overtime of overhead cost. To improve, organization can
claim without appropriate allocation cost. There use activity-based costing to improve allocations
is no overhead cost, labor hours expend, and under either job order or job process costing
machine operations performed. This all will system. Activity-based costing can trace cost to
cause inefficiency and quality control problem. the activities that create them and allocates them
accordingly. Activity-based costing aims to link
costs to corporate strategy results in decisions
about what goods and services to produce. By
measuring the cost of the basic activities,
activity-based costing provides information to
management for evaluating the consequences of
their decisions.

19
 4.2 Discuss How Big Data Analytic Can Used to Improve Production

Question:

Physical controls remain as the main concern in the production cycle, especially for business
dealing with tangible assets. The loss of its assets and product would have a direct negative
impact on a business’s profit margin and eventually will affect the sustainability of the business
itself. Discuss how big data analytic can be used to improve production.

Answer:

Big data analytic is the use of advanced analytic techniques against very large, diverse big data sets
that include structured, semi structured and unstructured data from different sources and in different
size from terabytes to zettabytes. Using data analytics, manufacturer can discover new information
and identify patterns that enable them to improve processes, increase supply chain efficiency and
identify variables that affect production quality, volume or consistency.

Data analytic helps manufacturer uncover defects in process, speed product development and
improve or maintain product quality as well as reduce variation in quality. Process manufacturers are
using the data analytics to access the raw materials to make sure they meet production requirements
so that they can achieve their objective of the activity to design a product that meets customer
requirement.

Big data analytics can help improve by bar coding of materials to improve speed and accuracy.
RFID tags can eliminate human intervention in the scanning process. By collecting data about
productions operations of raw materials used. Big data analytics can provide machinery and
equipment usage when machinery cost make up an ever increasing proportion of production cost.
Data about equipment were collected at each production step, often with data about labor cost.

To improve production, accounting information system must collect and process data and
information about plant, property and equipment used in production cycle. The assets represent a
significant portion of total asset for many companies and need to be monitored as an investment
through data analytics, the cost of fixed asset justifies more elaborate controls to safeguard the
maintenance of detailed records of each item.

20
 5.0. PBL Session 5: General Ledger and Reporting System

5.1 THREAT 1: Errors in updating the general ledger because of inaccurate/incomplete

journal entries or posting of journal entries

1. Data Entry Processing Integrity Controls

The data entry processing integrity controls are needed to ensure that they are accurate and complete
as the threat can lead to a poor decision making based false information in financial performance
report. The following types of input, edit and processing controls consist of:

a) Validity checks over existence of general ledger accounts to ensure that the general ledger
accounts exist for each account number as referred in a journal entry.
b) Field checks to ensure that the amount field only contains numeric data in the journal entry.
c) Zero-balance checks to ensure the equality between the debits and credits in the journal entry.
A nonzero balance indicates the processing error.
d) Completeness test to ensure that all relevant data especially the source of the journal entry are
entered.
e) Closed-loop verification to check the accuracy of the data that matching the account numbers
with account descriptions, to ensure that the correct general ledger account is being accessed
f) Sign check on debit and credit entries of the general ledger account balance after the updating
is completed in order to verify that the balance is of the appropriate nature.
g) Calculation of run-to-run totals can verify the accuracy of journal voucher batch processing.
Based on the starting balance and the total debits and credits applied to the account, the
computer must calculate the new balance of the general ledger account and then compare that
with the actual account balance in the updated general ledger. Any discrepancies indicate an
error in processing which needs to be investigated.

21
2. Prepare the Reconciliation and Control Report

Reconciliation and control reports can detect errors made during updating and processing by
preparing trial balances. The trial balance is a report that lists the balances for all general ledger
accounts that shows the total of all debit balances in various accounts should equal the total of all
credit balances. It is important for the reconciliation:

a) To compare the general ledger control account balances with the total balance in the
corresponding subsidiary ledger. For example, the sum of the balances of individual customer
accounts should be equal the number of accounts receivable control account in the general
ledger.
b) To ensure the general ledger always in balance by verifying the temporary suspense and
clearing accounts have zero balances.
c) To examine all transactions those, occur near the end of the accounting period in order to
verify that the transactions are recorded in the proper time period.

3. The Audit Trail.

The audit trail is the path of transactions that can be traced through the data processing information
system which affects general ledger account balances. The audit trail is used to check the accuracy
and validity of the ledger postings. By having an audit trail that properly designed, it may able to:

a) Trace any transaction from its original source document to the journal entry that updated the
general ledger and to any other document or report using that data.
b) Trace any item from a report back through the general ledger and to the original source
document.
c) Trace all changes in the general ledger balances from their beginning balance to their ending
balance.

22
 5.2 THREAT 2: Loss or unauthorized disclosure or alteration of financial data

CONTROL:

1. Use multifactor authentication and establish a strong password policy.

a) Multifactor authentication creates multiple layers of security to help increase the
confidence that the user requesting access is actually who they claim to be. This helps
to prevent unauthorized access to IT systems and financial data.
b) Users have to set a password consists of letters, numbers and special characters and
change it frequently to improve the strength of authentication mechanisms.

2. Segregation of duties
a) The authorization of general ledger cannot be carried out by the same person who
prepares the general ledger as the good internal control requires that an employee should
not be provided with so many obligations over the business transactions.
b) For instance, there should be staff A that handle the cash, staff B should prepare the
journal entries for each transaction and staff C should authorize the transaction made by
staff B.
c) The segregation can be a way to prevent the staff from falsifying records to cover up any
false transaction that was inappropriately authorized.

3. Encryption of data
a) Encryption is used to protect confidential and private information and guard the
information against the intruders as a defence to prevent unauthorized access to the
sensitive information.
b) It also can be a preventive control in order to prevent the employees who do not have
access to financial data, view the sensitive information and let them able to alter or
modify the financial data c. The financial data should be encrypted when it is being
transmitted over the internet to external users.

23
4. Restrict the user’s access and limit the functions that each legitimate user may perform
on financial data.
a) For example, most managers should be given read-only access to financial data to prevent
them from concealing the fraud or poor performance by altering the financial data.
b) This includes the restriction of the access from IP addresses other than of the office or
allowed list of IP’s.
c) Any changes, modification or alteration on financial data should be allowed only from the
terminal in a controller’s office to mitigate the risk of fraud.

24
 5.3 THREAT 3: Loss or destruction of the General Ledger

The approach to manage the danger is to adapt the back-up and emergency management protocols to
the possibility of failure. Data backups are used in any situations when records cannot be retrieved,
whether due to technical problem, technological glitches or human error. Multiple copies will be
generated irrespective of which backup technique is used. Backups were built to reduce the issue of
loss to records and to alleviate the question of disaster recovery.

The threat:

(1) Inaccurate or invalid GL data

(2) Unauthorized disclosure or financial information

(3) Loss or destruction of master data

How to control:

(1) Use of internal and external file labels to protect from accidental data loss

(2) Make regular backup copies of the general ledger, one copy stored off-site

(3) A good disaster recovery plan and

(4) Access and processing integrity controls to ensure confidentiality and accuracy of data
transmitted to branch offices or externally.

(5) Use various processing controls to minimize risk of data input errors

(6) Restrict access so only authorized employees can make changes to master data

(7) Multifactor authentication and physical security controls

(8) Employ the backup and disaster recovery procedures

25