Control and ais, revenue cycle

© 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart
Creating the great business leaders
Control and Accounting Information
Systems

Fakultas Ekonomi
dan Bisnis
School of Economic and
Business
Telkom
University
2 Creating the great business leaders
 Questions to be addressed in this chapter:
 What are the basic internal control concepts, and why are computer
control and security important?
 What is the difference between the COBIT, COSO, and ERM control
frameworks?
 What are the major elements in the internal environment of a
company?
 What are the four types of control objectives that companies need to
set?
 What events affect uncertainty, and how can they be identified?
 How is the Enterprise Risk Management model used to assess and
respond to risk?
 What control activities are commonly used in companies?
 How do organizations communicate information and monitor control
processes?
INTRODUCTION

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Why AIS threats are increasing
 Control risks have increased in the last few years because:
 There are computers and servers everywhere, and information is
available to an unprecedented number of workers.
 Distributed computer networks make data available to many users,
and these networks are harder to control than centralized
mainframe systems.
 Wide area networks are giving customers and suppliers access to
each other’s systems and data, making confidentiality a major
concern.
INTRODUCTION

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 To use IT in achieving control objectives,
accountants must:
 Understand how to protect systems from threats.
 Have a good understanding of IT and its capabilities and
risks.
 Achieving adequate security and control over the
information resources of an organization should be
a top management priority.
INTRODUCTION

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Internal control is the process implemented by the board of
directors, management, and those under their direction to
provide reasonable assurance that the following control
objectives are achieved:
 Assets (including data) are safeguarded.
 Records are maintained in sufficient detail to accurately and fairly
reflect company assets.
 Accurate and reliable information is provided.
 There is reasonable assurance that financial reports are prepared in
accordance with GAAP.
 Operational efficiency is promoted and improved.
 Adherence to prescribed managerial policies is encouraged.
 The organization complies with applicable laws and regulations.
OVERVIEW OF CONTROL CONCEPTS

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Internal controls perform three important
functions:
 Preventive controls
 Detective controls
 Corrective controls
• Remedy problems that have occurred by:
– Identifying the cause;
– Correcting the resulting errors; and
– Modifying the system to prevent future
problems of this sort.

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Internal controls are often classified as:
 General controls
 Application controls
• Prevent, detect, and correct transaction errors
and fraud.
• Concerned with accuracy, completeness,
validity, and authorization of the data captured,
entered into the system, processed, stored,
transmitted to other systems, and reported.

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 A number of frameworks have been
developed to help companies develop
good internal control systems. Three of
the most important are:
 The COBIT framework
 The COSO internal control framework
 COSO’s Enterprise Risk Management
framework (ERM)
CONTROL FRAMEWORKS

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 COBIT framework
 Also know as the Control Objectives for Information and
Related Technology framework.
 Developed by the Information Systems Audit and Control
Foundation (ISACF).
 A framework of generally applicable information systems
security and control practices for IT control.
CONTROL FRAMEWORKS

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 COSO’s internal control framework
 The Committee of Sponsoring Organizations (COSO) is a
private sector group consisting of:
 The American Accounting Association
 The AICPA
 The Institute of Internal Auditors
 The Institute of Management Accountants
 The Financial Executives Institute
CONTROL FRAMEWORKS

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 COSO’s internal control model has five crucial
components:
- Control environment
- Control activities
- Risk assessment
- Information and communication
- Monitoring
CONTROL FRAMEWORKS
• The entire process must be monitored and modified
as necessary.

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Basic principles behind ERM:
 Companies are formed to create value for owners.
 Management must decide how much uncertainty they will
accept.
 Uncertainty can result in:
 Risk
 Opportunity
CONTROL FRAMEWORKS
• The possibility that something will happen to
positively affect the ability to create or preserve
value.

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The most critical component of
the ERM and the internal
control framework.
 Is the foundation on which the
other seven components rest.
 Influences how organizations:
 Establish strategies and
objectives
 Structure business activities
 Identify, access, and respond to
risk
 A deficient internal control
environment often results in
risk management and control
breakdowns.
INTERNAL ENVIRONMENT

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The following policies and procedures are
important:
 Hiring
 Compensating
 Training
 Evaluating and promoting
 Discharging
 Managing disgruntled employees
 Vacations and rotation of duties
 Confidentiality insurance and fidelity bonds
INTERNAL ENVIRONMENT

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 To learn a little about segregation of duties, let’s
first meet Bill.
CONTROL ACTIVITIES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Bill is in charge of a pile of the organization’s
money—let’s say $1,000.
CONTROL ACTIVITIES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Bill also keeps the books for that money.
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Bill has a date tonight, and he’s a little desperate to impress
that special someone, so he takes $100 of the cash. (Thinks
he’s only borrowing it, you know.)
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Bill also records an entry in the books to show that $100 was
spent for some “legitimate” purpose. Now the balance in
the books is $900.
CONTROL ACTIVITIES
Ledger
$900

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 How will Bill ever get caught at his theft?
CONTROL ACTIVITIES
Ledger
$900

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Now let’s change the story. Bill is in charge of the
pile of cash.
CONTROL ACTIVITIES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 But Mary keeps the books.
 This arrangement is a form of segregation of duties.
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Bill gets in a pinch again and takes $100 of the
organization’s cash.
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 How will Bill get caught?
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Segregation of accounting duties
 Effective segregation of accounting duties is achieved when
the following functions are separated:
 Authorization—Approving transactions and decisions.
 Recording—Preparing source documents; maintaining journals,
ledgers, or other files; preparing reconciliations; and preparing
performance reports.
 Custody—Handling cash, maintaining an inventory storeroom,
receiving incoming customer checks, writing checks on the
organization’s bank account.
 If any two of the preceding functions are the responsibility
of one person, then problems can arise.
CONTROL ACTIVITIES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
CONTROL ACTIVITIES
CUSTODIAL FUNCTIONS
• Handling cash
• Handling inventories, tools,
or fixed assets
• Writing checks
• Receiving checks in mail
AUTHORIZATION
FUNCTIONS
• Authorization of
transactions
RECORDING FUNCTIONS
• Preparing source
documents
• Maintaining journals,
ledgers, or other files
• Preparing reconciliations
• Preparing performance
reports

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 In a system that incorporates an effective
separation of duties, it should be difficult for any
single employee to commit embezzlement
successfully.
 But when two or more people collude, then
segregation of duties becomes impotent and
controls are overridden.
CONTROL ACTIVITIES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 If this happens . . .
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Then segregation of duties is out the window.
Collusion overrides segregation.
CONTROL ACTIVITIES
Ledger
$1,000

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Segregation of duties
 Good internal control requires that no single employee be
given too much responsibility over business transactions or
processes.
 An employee should not be in a position to commit and
conceal fraud or unintentional errors.
 Segregation of duties is discussed in two sections:
 Segregation of accounting duties
 Segregation of duties within the systems function
CONTROL ACTIVITIES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Authority and responsibility must be divided clearly among
the following functions:
 Systems administration
 Network management
 Security management
 Change management
 Users
 Systems analysts
 Programming
 Computer operations
 Information systems library
 Data control
CONTROL ACTIVITIES

Creating the great business leaders
The Revenue Cycle:
Sales to Cash Collections

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Questions to be addressed in this chapter include:
 What are the basic business activities and data processing
operations that are performed in the revenue cycle?
 What decisions need to be made in the revenue cycle, and
what information is needed to make these decisions?
 What are the major threats in the revenue cycle and the
controls related to those threats?
INTRODUCTION

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The revenue cycle is a recurring set of business
activities and related information processing
operations associated with:
 Providing goods and services to customers
 Collecting their cash payments
 The primary external exchange of information is
with customers.
INTRODUCTION

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Information about revenue cycle activities flows
to other accounting cycles, e.g.:
 The expenditure and production cycles
 The human resources/payroll cycle
 The general ledger and reporting function
INTRODUCTION
• Uses information produced by the
revenue cycle in preparing financial
statements and performance reports.

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Management also has to evaluate the efficiency
and effectiveness of revenue cycle processes:
 Requires data about:
 Events that occur.
 Resources used.
 Agents who participate.
 The data needs to be accurate, reliable, and timely.
INTRODUCTION

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Four basic business activities are performed in the
revenue cycle:
 Sales order entry
 Shipping
 Billing
 Cash collection
REVENUE CYCLE BUSINESS ACTIVITIES

Fakultas Ekonomi
dan Bisnis
School Economics and
Business
The Revenue Cycle : Sales To Cash Collection
Sales Order Entry
Take the custumer’s order
(in the store, by mail, by phone, on a website, by a salesperson in
the field)
Check the custumer’s credit (General authorization, Specific authorization)
Check inventory availability
(quantitiy on hand, quantity already committed to others, quantity
on order)
Respon to customer inquiries
(may occur before or after the order is placed, the quality of this
customer service can be critical to company success)
Shipping
Picking and packing the order (which products to pick, what quantity)
Shipping the order
(Physical count of inventory, quantities indicated on picking ticket,
quantities on sales order)
Billing
Invoicing (the amount to be paid, where o send payment)
Updating accounts receivable (Debit n credit customer accounts)
Cash Collection
Possible approaches to collecting
cash
Turnaround documents forwaded to accounts receivable
Lockbox arrangements
Electronic lockboxes
Electronic fund transfer and bill payment
Financial electronic data interchange (EDI)
Accept credit cards or procurement card form customers

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Sales order entry is performed by the sales order
department.
 The sales order department typically reports to the
VP of Marketing.
 Steps in the sales order entry process include:
 Take the customer’s order.
 Check the customer’s credit.
 Check inventory availability.
 Respond to customer inquiries (may be done by customer
service or sales order entry).
SALES ORDER ENTRY

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
1.1
Take
Order
Customer
Shipping
1.2
Approve
Credit
1.3
Check
Inv.
Avail.
Billing
Ware-
house
Purchas-
ing
1.4
Resp. to
Cust. Inq.
Customer
Sales Order
Customer
Inventory
Orders
Orders
Approved
Orders
Packing
List
Sales
Order
Sales
Order
Inquiries
Response
DFD for
Sales Order Entry

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Take customer orders
 Order data are received on a sales order document which
may be completed and received:
 In the store
 By mail
 By phone
 On a Website
 By a salesperson in the field
SALES ORDER ENTRY

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The sales order (paper or electronic) indicates:
 Item numbers ordered
 Quantities
 Prices
 Salesperson
SALES ORDER ENTRY

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 How IT can improve efficiency and effectiveness:
 Orders entered online can be routed directly to the
warehouse for picking and shipping.
 Sales history can be used to customize solicitations.
 Choiceboards can be used to customize orders.
SALES ORDER ENTRY
• Initially popular with Dell and Gateway.
• Now used for purchases of shoes and
jeans!

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Electronic data interchange (EDI) can be used to
link a company directly with its customers to
receive orders or even manage the customer’s
inventory.
 Email and instant messaging are used to notify
sales staff of price changes and promotions.
 Laptops and handheld devices can equip sales
staff with presentations, prices, marketing and
technical data, etc.
SALES ORDER ENTRY

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 How can IT improve the process?
 Automatic checking of credit limits and balances
 Emails or IMs to the credit manager for accounts needing
specific authorization
SALES ORDER ENTRY

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The second basic activity in the revenue cycle is filling
customer orders and shipping the desired merchandise.
 The process consists of two steps
 Picking and packing the order
 Shipping the order
 The warehouse department typically picks the order
 The shipping departments packs and ships the order
 Both functions include custody of inventory and
ultimately report to the VP of Manufacturing.
SHIPPING

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
2.1
Pick &
Pack
Sales Order
2.2
Ship
Goods
Sales
Order
Entry
Shipping
Carrier
Inventory
Shipments
Billing &
Accts.
Rec.
Picking List
Goods &
Packing
List
Goods,
Packing Slip,
& Bill of Lading
Bill of
Lading &
Packing Slip
Sales
Order

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The third revenue cycle activity is billing
customers.
 This activity involves two tasks:
 Invoicing
 Updating accounts receivable
BILLING

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
3.1
Billing
Customer
3.2
Maintain
Accts.
Rec.
Sales
Order
Entry
Billing and
Accounts
Receivable
CustomerSales
General
Ledger &
Rept. Sys.
Shipping
Mailroom
Sales Order
Sales
Invoice
Remittance
List

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 The final activity in the revenue cycle is
collecting cash from customers.
 The cashier, who reports to the treasurer,
handles customer remittances and deposits
them in the bank.
 Because cash and checks are highly vulnerable,
controls should be in place to discourage theft.
 Accounts receivable personnel should not have access
to cash (including checks).
CASH COLLECTIONS

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 In the revenue cycle (or any cycle), a well-designed AIS
should provide adequate controls to ensure that the
following objectives are met:
 All transactions are properly authorized.
 All recorded transactions are valid.
 All valid and authorized transactions are recorded.
 All transactions are recorded accurately.
 Assets are safeguarded from loss or theft.
 Business activities are performed efficiently and effectively.
 The company is in compliance with all applicable laws and
regulations.
 All disclosures are full and fair.
CONTROL OBJECTIVES, THREATS, AND
PROCEDURES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
 Threats in the sales order entry process include:
1) THREAT 1: Incomplete or inaccurate customer orders
2) THREAT 2: Sales to customers with poor credit
3) THREAT 3: Orders that are not legitimate
4) THREAT 4: Stockouts, carrying costs, and markdowns
5) THREAT 5: Shipping Errors
6) THREAT 6: Theft of Inventory
7) THREAT 7: Failure to bill customers
8) THREAT 8: Billing errors
9) THREAT 9: Errors in maintaining customer accounts
10) THREAT 10: Theft of cash
THREATS IN SALES ORDER ENTRY

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
11) THREAT 11: Loss, alteration, or unauthorized disclosure
of data
12) THREAT 12: Poor performance
GENERAL CONTROL ISSUES

Fakultas Ekonomi
dan Bisnis
Business
Telkom
University
Aktivitas Ancaman Pengendalian
Masalah-masalah
umum di dalam
siklus pendapatan
1. Data induk tidak akurat
atau tidak valid
2. Pengungkapan yang
tidak diotorisasi atas
informasi sensitif
3. Kehilangan atau
penghancuran data
4. Kinerja buruk
a. Pengendalian Integritas
pemrosesan data
b. Pembatasan akses ke data
induk
c. Tinjauan atas seluruh
perubahan terhadap data
induk
Enskripsi
Backup dan prosedur pemulihan
bencana
Laporan manajerial
Ancaman Dan Pengendalian Dalam Siklus Pendapatan

Fakultas Ekonomi
dan Bisnis
Business
Entri pesanan Penjualan 1. Pesanan yang tidak lengkap/tidak
akurat
2. Pesanan yang tidak valid
3. Piutang yang tidak tertagih
4. Kehabisan stock atau kelebihan
persediaan
5. Kehilangan pelanggan
a. Pengendalian edit entri data
b. Pembatasan akses ke data induk
Tanda tangan digital atau tanda tangan tertulis
a. Batas kredit
b. Otorisasi spesifik untuk menyetujui penjualan
kepada para pelanggan baru atau penjualan
yang melebihi batas kredit seorang pelanggan
c. Penuaan piutang
a. Sistem pengendalian persediaan perpetual
b. Penggunaan kode batang (bar code) atau RFID
c. Pelatihan
d. Perhitungan fisik persediaan secara periodik
e. Prediksi penjualan dan laporan aktivitas
Sistem CRM, situs swadaya, dan evaluasi yang
tepat atas peringkat layanan pelanggan.

Fakultas Ekonomi
dan Bisnis
Business
Pengiriman 1. Memilih barang yang salah atau
kuantitas yang salah
2. Pencurian persediaan
3. Kesalahan pengiriman
(penundaan atau kegagalan
untuk mengirim, kuantitas yang
salah, barang yang salah, alamat
yang salah, duplikasi)
a. Teknologi kode batang dan RFID
b. Rekonsiliasi daftar pemilihan untuk
detail pesanan penjualan
a. Pembatasan akses fisik ke persediaan
b. Dokumentasi seluruh transfer
persediaan
c. Teknologi RFID dan kode batang
d. Perhitungan fisik persediaan secara
periodik dan rekonsiliasi terhadap
kuantitas tercatat
a. Rekonsiliasi dokumen pengiriman
dengan pesanan penjualan, daftar
pemilihan, dan slip pengepakan
b. Menggunakan sistem RFID untuk
mengidentifikasi penundaan
c. Entri data melalui pemindai
kodebatang dan RFID
d. Pengendalian edit entri data (jika data
pengiriman dimasukan ke terminal)
e. Konfigurasi sistem ERP untuk
mencegah pengiriman duplikat

Fakultas Ekonomi
dan Bisnis
Business
Penagihan 1. Kegagalan untuk menagih
2. Kesalahan penagihan
3. Kesalahan posting dalam piutang
4. Memo kredit yang tidak akurat atau tidak
valid
a. Pemisahan fungsi penagihan dan pengiriman
b. Rekonsiliasi secara periodik atas faktur dengan
pesanan penjualan, kartu pengambilan, dan
dokumen pengiriman
a. Konfigurasi sistem untuk memasukan data harga
secara otomatis
b. Pembatasan akses ke data induk harga
c. Pengendalian edit entri data
d. Rekonsiliasi dokumen pengiriman (kartu
pengambilan, bill of lading, dan daftar pengepakan)
untuk pesanan penjualan
e. Pengendalian entri data
f. Rekonsiliasi total batch
g. Pengiriman laporan bulanan kepada para pelanggan
h. Rekonsilliasi buku pembantu piutang di buku besar
umum
a. Pengendalian entri data
b. Rekonsiliasi total batch
c. Pengiriman laporan bulanan kepada para pelanggan
d. Rekonsiliasi buku pembantu piutang di buku besar
umum
a. Pemisahan tugas otorisasi memo kredit baik dari
entri pesanan penjualan maupun pemeliharaan
rekening pelanggan
b. Konfigurasi sistem untuk memblokir memo kredit
kecuali ada dokumentasi yang sesuai dengan
pengembalian barang rusak atau otorisasi yang
spesifik oleh manajemen

Control and ais, revenue cycle

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Control and ais, revenue cycle