HI5019-Strategic Information System Tutorial Solution

Get Help By Expert


Required: A. Describe the role that each of the following areas has in the establishment, maintenance, and evaluation of internal control: (1) Management, (2) External auditor, and (3) Internal audit. B. To whom should the Director of Internal Audits report? Explain your answer. C. Comment on the audit committee member’s perspective as to the committee’s current composition Answer.A. The Role of Management, External Auditor and Internal Auditor.1) Role of Management SOX requires public companies to implement an adequate system of internal controls over their financial reporting process, including transaction processing systems. SOX requires the management to assess and annually report on the effectiveness of internal controls. This addressing the following points: ➢ Understand the flow of transactions, including IT aspects, in sufficient detail to identify points at which a misstatement could arise. ➢ Using a risk-based approach, assess the design and operating effectiveness of selected internal controls related to material accounts. ➢ Assess the potential for fraud and evaluate the controls designed to prevent or detect fraud. ➢ Evaluate and conclude on the adequacy of controls over the financial statement reporting process. ➢ Evaluate entity-wide (general) controls that correspond to the components of the COSO framework. cta_question_1 2) Role of External Auditor: The external auditor reviews the organization’s control structure per the COSO internal control model. This includes the control environment, risk assessment, information and communications, monitoring, and control procedures. The auditor issues an opinion on control adequacy and identifies any material weaknesses in internal controls.3) Role of Internal Auditor The IA performs a wide range of activities on behalf of the organization: ➢ including conducting financial audits ➢ examining an operation’s compliance with organizational policies ➢ reviewing the organization’s compliance with legal obligations ➢ evaluating operational efficiency ➢ detecting and pursuing fraud within the firm. For cost reduction and efficiency purposes, internal auditors often cooperate with and assist external auditors in performing financial audits, including tests of controls. For example, a team of internal auditors can perform computer controls tests under the supervision of a single external auditor.B. To Whom Should IA ReportThe Director of Internal Audits should report to the Board of Directors Audit Committee When an internal audit department reports directly to a department, the internal auditor’s independence is compromised, and the external auditor may not rely on the internal auditors’ evidence. External auditors can rely in part on evidence gathered by internal audit departments that are organizationally independent and report to the board of directors’ audit committee. cta_question_2 C. Structure of Audit CommitteeThe audit committee needs to be reconstituted to be in compliance with SOX. The audit committee serves as an independent “check and balance” for the internal audit function and liaison with external auditors. To be effective:➢ The audit committee should consist of outsiders (not associated with the families of executive management or former officers). ➢ With the advent of the Sarbanes-Oxley Act, at least one member of the audit committee must be a “financial expert.”Question 2.2. There is a difference between financial and non-financial transactions. Discuss this difference and give three examples of each. Ans. Financial transactions affect the accounts in the financial statements in some manner. Three examples are 1) use of equipment depreciation, 2) payment of a bond payable, and 3) receipt of cash from a customer for sale previously made on the account. Non-financial transactions include business events that do not impact the financial statements. Three examples are 1) a book checked out by a student in a school library, 2) the recording of a customer complaint via a toll-free hotline, and 3) status reports of research and development projects.Question 2.3. The transaction processing system is a significant component of the accounting information system. Do you think the transaction processing system differs significantly between the service and manufacturing industries? Are they equally important to both sectors? Ans. The transaction processing systems only differ in the types of data elements collected. Both service and manufacturing industries need to collect data regarding business processes. While a manufacturing firm may collect data regarding the amount of scrap generated at a particular workstation, a service firm, such as a public accounting firm, needs to collect data regarding the number of hours spent by staff to verify cash balances. Transaction processing systems are equally important to both types of industries. cta_question_3 Question 2.4. Discuss the difference between the financial reporting system and the general ledger system. Ans. The General Ledger System (GLS) summarises all of the transaction cycle activity and general journal entries. The GLS provides most of the input in the Financial Reporting System (FRS). The FRS communicates information from the GLS to external users. The FRS often collects additional pieces of information other than that which is found in the GLS. An example of this is when a pending lawsuit is likely to be settled in the next year. The GLS would not have this informationQuestion 2.5. Why is an active board of directors’ audit committee important to an organization? Ans. To be effective, the audit committee must be willing to challenge the internal auditors (or the entity performing that function) as well as management when necessary. Part of the role of committee members is to look for ways to identify risk. For instance, they might serve as a sounding board for employees who observe suspicious behavior or spot fraudulent activities. In general, they become an independent guardian of the entity’s assets by whatever means is appropriate. Corporate frauds often have some relationship to audit committee failures. These include lack of independence of audit committee members, lack of experienced members on the audit committee, inactive audit committees, and the total absence of an audit committee.Question 2.6. Why is it important to organisationally separate the accounting function from other functions of the organization? Ans. The accounting function provides record-keeping services for all of the operations and day-to-day activities of other departments, which affect the financial position of the organization. Record-keeping tasks must be kept separate from any area that has custody over assets. Thus, the accounting function must remain independent so that the protection of the firm’s assets is carried out in an environment with minimum possibilities for theft.Question 2.7. What is the most striking difference between the database model and the flat-file model? Ans. The most striking difference between the database model and the flat-file model is the pooling of data into a common database that all organizational users share cta_question_1

Online Exam & Assignment Writing Services

50000+ Orders Delivered

5 Star Rating

Confidential & Secure Assignment Help For

Assessment Answer

Online Exam

Case Study Answers

TAFE & VET Levels

Tutorial Solutions

Summative & Individual

GBA & Reflective

MCQ Quiz & Test Help

Sample Assignment Download

BSBDIV501 Manage Diversity in the Workplace Assessment Answer
Students pursuing a business management course in Australia, generally come across an assignment of BSBDIV501 Manage diversity in the workplace assessment. The BSBDIV501 assessment answer let the students understand about…
SITXINV004 Control Stock Assignment Assessment Answer
Your task: Provide a detailed response to each of the following questions Question 1: List 6 examples of forms that are used in a manual control system- Question 2: Why…
Commercial Cookery


Instant Paper Writing Services by Native Australian Writers

Plagiarism Free Solutions
100% Original Work
24*7 Online Assistance
Native PhD Experts
Hire a Writer Now

Get help with Homework Assignments, Papers, and Projects