Chapter 16
General Ledger and Reporting System
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General Ledger and Reporting
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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
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General Ledger and Reporting Activities
Basic activities performed in the general ledger and reporting cycle
1. Update general
ledger
2. Post adjusting
entries
3. Prepare financial
statements
4. Produce
management
reports
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General Ledger and Reporting General
Threats
 Inaccurate or invalid general ledger data
 Unauthorized disclosure of financial statement
 Unauthorized disclosure of financial statement
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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
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General Ledger and Reporting General
Controls
 Unauthorized disclosure of financial statement
 Access controls
 Encryption
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General Ledger and Reporting General
Controls
 Loss or destruction of data
 Backup and disaster recovery procedures
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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.
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Update General Ledger
 The following types of input edit and processing controls
are needed to ensure that the entries are accurate and
complete
1. A validity check – to ensure that general ledger accounts
exist for each account number referenced in a journal entry.
2. Field (format) checks - to ensure that the amount field in the
journal entry contains only numeric data.
3. A zero-balance check - to verify the total debits equal total
credits in a journal entry.
4. A completeness test - to ensure that all pertinent data are
entered, especially the source of the journal entry.
5. Closed-loop verification - matching account numbers with
account descriptions, to ensure that the correct general
ledger account is being accessed.
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Update General Ledger
 The following types of input edit and processing controls
are needed to ensure that the entries are accurate and
complete
6. 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)
7. Calculating run-to-run totals – to verify the accuracy of
journal voucher batch processing
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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
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they were recorded correctly.
Update General Ledger Threats
 Inaccurate updating of general ledger
 Unauthorized journal entries
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Update General Ledger controls
 Inaccurate updating of general ledger
 Data entry processing integrity controls
 Reconciliations and control reports
 Audit trail creation and review
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Update General Ledger controls
 Unauthorized journal entries
 Access controls
 Reconciliations and control reports
 Audit trail creation and review
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Post Adjusting Entries Threats
 Inaccurate adjusting entries
 Unauthorized adjusting entries
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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
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Post Adjusting Entries controls
 Unauthorized adjusting entries
 Access controls
 Reconciliations and control reports
 Audit trail creation and review
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Prepare Financial Statement Threats
 Inaccurate financial statements
 Fraudulent financial reporting
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Prepare Financial Statement controls
 Inaccurate financial statements
 Processing integrity controls
 Use of packaged software
 Training and experience in applying IFRS and XBRL
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Prepare Financial Statement controls
 Fraudulent financial reporting
 Audits
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eXtensible Business Reporting
Language (XBRL)
Without
With
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XBRL


Instance Document

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
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Produce Management Reports
Threats
 Poorly designed reports and graphs
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Produce Management Report
Controls
 Responsibility accounting
 Balanced scorecard
 Training on proper graph design
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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
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