General Ledger and Reporting System Chapter 16 General Ledger and Reporting System

General Ledger and Reporting

General Ledger and Reporting Primary function is to collect and organize The accounting cycle activities Each accounting subsystem provides information about regular transaction. Financing activities Investing activities The treasurer provides information about financing and investing activities, such as the issuance or retirement of debt and equity instruments and the purchase or sale of investment securities. Budget activities Provided by budget department Adjustments The controller provides adjusting entries

General Ledger and Reporting Activities Basic activities performed in the general ledger and reporting cycle Update general ledger Post adjusting entries Prepare financial statements Produce management reports

General Ledger and Reporting General Threats Inaccurate or invalid general ledger data Unauthorized disclosure of financial statement

General Ledger and Reporting General Controls Inaccurate or invalid general ledger data Data processing integrity controls Restriction of access to general ledger Review of all changes to general ledger data

General Ledger and Reporting General Controls Unauthorized disclosure of financial statement Access controls Encryption

General Ledger and Reporting General Controls Loss or destruction of data Backup and disaster recovery procedures

Update General Ledger Posting journal entries that originate from two sources: Accounting subsystems. By means of summary journal entries Treasurer Update general ledger for non routine transactions Journal voucher file – contains the information that would be found in the general journal in a manual accounting system. Date of the entry, debit, credit, and amount.

Update General Ledger The following types of input edit and processing controls are needed to ensure that the entries are accurate and complete A validity check – to ensure that general ledger accounts exist for each account number referenced in a journal entry. Field (format) checks - to ensure that the amount field in the journal entry contains only numeric data. A zero-balance check - to verify the total debits equal total credits in a journal entry. A completeness test - to ensure that all pertinent data are entered, especially the source of the journal entry. Closed-loop verification - matching account numbers with account descriptions, to ensure that the correct general ledger account is being accessed.

Update General Ledger The following types of input edit and processing controls are needed to ensure that the entries are accurate and complete A sign check – of the general ledger account balance, once updating is completed, to verify that the balance is of the appropriate nature (debit or credit) Calculating run-to-run totals – to verify the accuracy of journal voucher batch processing

Update General Ledger Reconciliations and control reports Trial balance Control account balances & subsidiary balances total Close all temporary accounts (including suspense or clearing accounts) The audit trail Trace any transaction from its original source document (whether paper or electronic) to the journal entry that updated the general ledger and to any report or other document using the data. This provides a means to verify that all authorized transactions were recorded. Trace any item appearing in a report back through the general ledger to its original source document (whether paper or electronic). This provides a means to verity that all recorded transactions were indeed authorized and that they were recorded correctly.

Update General Ledger Threats Inaccurate updating of general ledger Unauthorized journal entries

Update General Ledger controls Inaccurate updating of general ledger Data entry processing integrity controls Reconciliations and control reports Audit trail creation and review

Update General Ledger controls Unauthorized journal entries Access controls Reconciliations and control reports Audit trail creation and review

Post Adjusting Entries Threats Inaccurate adjusting entries Unauthorized adjusting entries

Post Adjusting Entries controls Inaccurate adjusting entries Data entry processing integrity controls Spreadsheet error protection controls Standard adjusting entries Reconciliations and control reports Audit trail creation and review

Post Adjusting Entries controls Unauthorized adjusting entries Access controls Reconciliations and control reports Audit trail creation and review

Prepare Financial Statement Threats Inaccurate financial statements Fraudulent financial reporting

Prepare Financial Statement controls Inaccurate financial statements Processing integrity controls Use of packaged software Training and experience in applying IFRS and XBRL

Prepare Financial Statement controls Fraudulent financial reporting Audits

eXtensible Business Reporting Language (XBRL) Without With

XBRL Instance Document Taxonomy Linkbases Contains data from financial statements Marked up or tagged with data describing the data Each piece of data in XBRL is an element Taxonomy Set of files defining the various elements and the relationships between them A schema Contains the definitions of every element that could appear in an instance document Linkbases Describes relationships between elements Reference Identifies relevant authoritative pronouncements Calculation Specifies how to combine elements Presentation How to group elements Label Associates human-readable labels with elements

Produce Management Reports Threats Poorly designed reports and graphs

Produce Management Report Controls Responsibility accounting Balanced scorecard Training on proper graph design

Balanced Scorecard A report that provides a multidimensional perspective of organizational performance (example: page 499) Reflecting four perspectives of the organization Financial Customer Internal operations Innovation and learning Showing goals and measures Targets Actual