University of Adelaide Adelaide Business School

ACCOUNTING SYSTEMS and PROCESSES (M)

TUTORIAL 11 – Answers Guide

BEFORE TUTORIAL 11

1 Read the material indicated below and attempt answers to the questions that
follow.

Material to read:
MyUni>
Data Analytics – Microsoft Power BI Material>
Topic 10 – Creating decomposition trees. pdf

Key aims of Topic 9 are to develop an understanding of using decomposition

trees for root cause analysis.

Students are expected to learn basic hands-on skills to carry out these tasks.

Students are expected to attempt tasks in this document before the tute and raise
questions about issues encountered during the tute.

2 Prepare the answers to the following questions:

Question 1
As an internal auditor for the Quick Manufacturing Company, you are
participating in the audit of the company’s AIS. You have been reviewing the
internal controls of the computer system that processes most of its accounting
applications. You have studied the company’s extensive systems documentation.
You have interviewed the information system manager, operations supervisor, and
other employees to complete your standardized computer internal control
questionnaire. You report to your supervisor that the company has designed a
successful set of comprehensive internal controls into its computer systems. He
thanks you for your efforts and asks for a summary report of your findings for
inclusion in a final overall report on accounting internal controls.
Have you forgotten an important audit step? Explain. List five examples of
specific audit procedures that you might recommend before reaching a conclusion.

The important audit step that has not been performed is tests of controls (sometimes
called compliance tests). A system review only tells the auditor what controls are
prescribed. Tests of controls allow the auditor to determine whether the prescribed
controls are being adhered to and they are operating effectively.

Examples of audit procedures that would be considered tests of controls are:

• Observe computer operations, data control procedures, and file library control
procedures.
• Inquiry of key systems personnel with respect to the way in which prescribed
control procedures are interpreted and implemented. A questionnaire or checklist
often facilitates such inquiry.
• Review a sample of source documents for proper authorization.
• Review a sample of on-line data entries for authorization.
 • Review the data control log, computer operations log, file librarian's log, and
error log for evidence that prescribed policiesare adhered to.
• Test data processing by submitting a set of hypothetical transactions and
comparing system outputs with expected results.
• Trace selected transactions through the system and check their processing
accuracy.
• Check the accuracy of a sample of batch totals.
• Review system operating statistics.
• Use a computer audit software package to edit data on selected master files and
databases.

Question 2

As an internal auditor, you have been assigned to evaluate the controls and
operation of acomputer payroll system. To test the computer systems and
programs, you submit independentlycreated test transactions with regular data in
a normal production run.
List four advantages and two disadvantages of this technique

a. Advantages b. Disadvantages
• Does not require extensive programming knowledge • Impractical to test all error possibilities.
• Approach and results are easy to understand. • May be unable to relate input data to
• The complete system may be reviewed. output reports in a complex system.
• Results are often easily checked. • If independent files are not used, it may be
• An opinion may be formed as to the system's data difficult to reverse or back out test data.
processing accuracy. • Preparation of satisfactory test transactions
• A regular computer program may be used. may be time consuming.
• It may save time.
• The auditor gains experience.
• The auditor maintains control over the test.
• Invalid data can be submitted to test for rejections.
(CIA Examination, adapted)

Question 3
XBRL is ensuring the standardisation of financial reports. Why is this important in
today’s global environment?

Many companies across the globe have introduced International Financial Reporting
Standards which are a consistent set of financial reporting standards that ensure
consistency and comparability. XBRL enables the International Financial Reporting
Standards to be used as a basis of their coding structure. Therefore, accounts tagged
in XBRL are consistent and comparable and also in electronic format. When the data
is transferred electronically the data that is coded can be seen for what it is coded as
so the code attaches to that item of data. Therefore there is no uncertainty as to what a
figure means. Therefore, XBRL can be used to electronically compare financial
reports from many companies in countries which is important to be able to in today’s
global environment.

Accounting Systems and Processes (M) Tutorial 11 Page 2

Question 4
After reading the case study entitled “XBRL and business information supply chains:
enhancing business-to-government reporting” (see MyUni>Modules>Tutorial
Questions> Week11AddendumOnXBRLandBusinessToGovernmentReporting.pdf),
answer the following questions.

1. What is XBRL and in what way does it improve the business information
supply chains?

eXtensible Business Reporting Language (XBRL) is a digital reporting standard that

enables the electronic communication of financial reports. It represents a data
formatting standard that can be used for the preparation and exchange of financial
data across heterogeneous computer platforms and software applications without the
need of rekeying data. By standardising data format and integrating business
information supply chains, XBRL can address the efficiency, accuracy and
transparency problems of business reporting.

2. How is XBRL being used in Australia?

XBRL is presently being used in the ambit of Standard Business Reporting, an

Australian Federal Government initiative that aims to reduce burden of business in
relation to fulfilling filing obligations. SBR can extract relevant information from
XBRL-enabled business and accounting applications used by businesses to
electronically prefill forms required by various government departments. After
checking these forms for accuracy filers can securely submit them electronically
online to the appropriate government agency thereby enabling them to fulfil their
filing obligations without having to use separate portals. XBRL thus enables SBR to
facilitate report preparation and filing in “a matter of seconds” (SBR, 2015) which is
very efficient and accurate relative to alternative forms of government reporting (e.g.
printed paper forms by mail or fax, email attachments in PDF, MS Word format).

3. What benefits can Australian businesses achieve by using SBR/XBRL?

For example, using SBR/XBRL businesses can benefit by increasing their

productivity enabling business to focus on core business and value-added activities.
Additionally, as reporting obligations often change as a result to updates in reporting
legislation or accounting standards underlying XBRL code will be automatically
updated ensuring that business can remain seamlessly compliant with evolving filing
obligations and GAAPs. Finally, as SBR/XBRL enables to share information on a
real-time basis with business advisors for progress monitoring or for continuous
auditing purposes.

4. What benefits can Australian government agencies achieve by using

SBR/XBRL?

Government agencies can also achieve a number of benefits by adopting SBR/XBRL.

SBR/XBRL both enhances and increases electronic reporting resulting is savings
across government. Improved filing efficiencies can facilitate revenue collection and
compliance monitoring. Finally, SBR/XBRL can reduce or even eliminate the need
for data manipulation enabling government agencies focus on service thereby and the
overall quality of their interactions with business.

Advantages for preparers:

Once the data is prepared in SBR the data could be extracted for the multiple
reporting requirements. Therefore, prepare data once use for multiple users would
save time in preparation and reporting.

Advantages for the users:

This advantage is for the government that receives these reports.
They are in electronic format. They are in a consistent standard. They would be
easily loaded into packages and all the data from all the agencies could be compared

Accounting Systems and Processes (M) Tutorial 11 Page 3

with minimum fuss and without re-entry of the data. The data would be tagged use
consistent and comparable tags.

DURING TUTORIAL 11

• Contribute to the class discussion of the above questions.

Please remember that you’ll enhance your learning by ACTIVELY

PARTICIPATING in the discussions.

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