SEC A

Financial statements
1) Balance Sheet (also called the Statement of Financial Position)
Uses – Liquidity, Solvency, Financial flexibility, Risk
Limitations - assets being recorded at historical cost, use of estimates, and the
omission of valuable non-monetary assets.
2) Income Statement
3) Statement of Cash Flows
Add all depreciation and amortization expense back to net income. • Add all non-
operating losses on the income statement back to net income. • Subtract all non-
operating gains on the income statement from net income. • Add and subtract the
changes in balance sheet accounts that are related to operating activities
4) Statement of Comprehensive Income – net income +
• Foreign currency translation adjustments, • Gains or losses and prior service costs
or credits related to a defined benefit pension plan that have not been recognized as
components of net periodic benefit cost, • Unrealized holding gains or losses on
available-for-sale securities, and • The effective portion of the gain or loss on a
derivative designated as a cash flow hedge.

5) Statement of Changes in Stockholders’ Equity

Categories of equity
1) Capital stock 2) Additional paid-in capital 3) Retained earnings 4) Accumulated other
comprehensive income items 5) Treasury stock 6) non-controlling interest
Stock div – reduce R/e, increase APic, SE – no change
Stock Split – incrrase no. of shares, reduce par value, SE – no change
Integrated Reporting <IR>
An integrated report is “less than” an annual report or 10K AND “GREATER THAN” a
traditional financially oriented financial report Because it has a much broader scope.

Accounts receivable
FOB Shipping Point - belong to the buyer from the moment the seller gives them to the
shipping company.
FOB Destination - belong to the seller until the buyer receives them.

Methods for valuing accounts receivable

T/ ac
 Hock page 53
1) Percentage of sales method 2) Percentage of receivables method
Page 55
T/ ac
Hock page 53

Factoring
without recourse- factor assumes the risk of any inability to collect the receivables.
the loss is the factor’s loss, fee high
with recourse –

Face value of the accounts receivable – page 60

Factoring fee (a % of the face value of the receivables) − Factor’s holdback for
merchandise returns (a % of the face value of the receivables) = Funds deposited to
the seller’s account − Interest expense = Cash available to the seller to withdraw

Inventory
In transit -
FOB Shipping Point buyer
FOB Destination seller
Consigned Goods Consigned goods are given by one company (the consignor) to
another company (the consignee) for that second company to sell to the end
consumer.
Title passes directly from the consignor to the end consumer. Therefore, the
consignee never bears the risk of loss (unless a contract passes this risk to them
the goods should be recorded as inventory on the records of the consignor company
because it bears the risk of loss.

Cost flow
Hock page 69

Periodic
Fifo
Lifo

Perpetual
Lifo
Fifo
Page 70

s lower of cost or market – middle of

• Ceiling, also called the Net Realizable Value. The net realizable value is the
maximum value used for the market value of the inventory. It is calculated as
follows: Net Realizable Value or Ceiling = Selling Price minus the Cost to Complete
and Dispose • Current replacement cost, or the cost to purchase the inventory now.
The current replacement cost will usually given in any LCM problem. • Floor, or the
minimum value that will be used as the market value for the inventory. It is
calculated as follows: Floor = Net Realizable Value (the Ceiling) minus a Normal Profit
Amount

Investments
1) Fair value method – used when the investor owns less than 20% of the investee
company’s stock 2) Equity method – used when the investor owns 21-50% of the
investee company’s stock 3) Consolidation - used when the investor owns 51% of the
investee company’s stock

What are the three classifications of debt securities using the fair value method? 1)
Trading – FV on b/s
2) Held-to-maturity – amortized cost
3) Available-for-sale - FV on b/s

Calculation of Depreciation check learning management system cma

Straight-line Depreciation Straight-line -
Depreciable Amount / Estimated Useful Life

Double Declining Balance

Double declining rate × book value of the asset at the beginning of the year

Sum of the Years’ Digits = n(n + 1) / 2

Impairment

If Carrying value > than cash value of the estimated future cash flows

Intangibles
Definite life – amortized over shorter of legal or useful life
Indefinite life – No amortization but test for impairment every year

All dovidends reduce stockholder’s equity except Stock div and stock split

Warratnties
An expense warranty is a manufacturer’s warranty given along with the sale of the
product, without any additional payment being required from the customer.
• A sales warranty is an extended warranty that is sold separately from the product.
Sales warranties may be offered by the manufacturer but also may be offered by
either the reseller or by a third party
 Deferred tax
Temporary timing differences occur when an item is not recognized for both book
and taxable income in the same period.
If an income or expense item is recognized only for book purposes or only for tax
purposes, but not both, it is a permanent difference

A deferred tax asset is created by an item that causes taxable income in the current
period to be higher than book income in the current period.
deferred tax liability is created by an item that causes taxable income in the current
period to be lower than book income in the current period.

Small Stock Dividend If the stock dividend is a small dividend (meaning less than or
exactly 25% of the total shares outstanding) the journal entry is based on the fair
value of the shares on the date of declaration:

Large Stock Dividend If the stock dividend is a large dividend (more than 25% of the
total shares outstanding) the journal entry is based on the par value of the shares:

Revenue recognition
Completed Contract Method
Contract price − Costs actually incurred to date − Costs expected to be incurred in
the future = Expected profit (loss)

Percentage-of-Completion Method
Expected profit * % OF Completion (Costs Incurred to Date = Percentage of
Completion Costs Incurred to Date + Expected Costs to Complete) – Previosuly
recognised profit

Steps
1) Identify the contract with a customer. 2) Identify the performance obligations
(promises) in the contract. 3) Determine the transaction price. 4) Allocate the
transaction price to the performance obligations in the contract. 5) Recognize
revenue when (or as) the reporting organization satisfies a performance
obligation.

Lease
1) Operating leases – a rental agreement 2) Finance leases – a purchase/sale
Capital lease criteria
1) Ownership transfers at the end of the lease. 2) The lease includes a written bargain
purchase option. 3) The PV of the minimum lease payments is equal to or more than 90% of
the fair market value of the asset at the time the lease is entered into. 4) The lease term is
75% or more of the remaining estimated economic useful life of the asset at the time the
lease is entered into.

GAAP vs IFRS – See learning managemts A 152

FASB – GAAP (Rules based)
IASB – IFRS (principles based)

Inventories –
• Revenue Recognition ifrs – no lifo,
Ifrs – lcm or lcnrv, Gaap – lcm
Ifrs – write downs are reversed, gaap – cannot

Fixed assets -

• Intangible Assets
• Leases
• Impairment of Assets
• Financial Statement Presentation
SEC B
Strategic plg

Strategic plans - broad, general, long-term plans (usually five years or longer) that are based
on the objectives of the organization. The company’s top management leads the strategic
planning effort.
Level of strategies –
Corporate – Multi business
Competitive – business unit
Functional – withing aa business
Process
1 mission, vision, values, and goals external competitive environment to identify
opportunities and threats. 3 internal operating environment to identify strengths,
weaknesses, and limitations. 4) Formulating and selecting strategies. 5) Developing and
implementing the chosen strategies
Types
intermediate plans - A strategic plan is broken down into intermediate or tactical plans (one
to five years), which are designed to implement specific parts of the strategic plan. Upper
and middle managers develop tactical plans
short-term plans/ operational plans (one week to one year) are developed from the tactical
plans. Operational plans focus on implementing the tactical plans to achieve operational
goals and include budgeted amounts. Middle and lower-level managers develop operational
plans.
Contingency planning is planning that a company develops to prepare for possible future
events (especially negative events). This is “what if?” planning.

External env
Legal and regulatory
Market forces, industry, trend and competition -

According to Porter, what are the five forces that shape competition within an industry? 1)
The risk of entry by potential competitors. 2) The intensity of rivalry among established
companies within an industry. 3) The bargaining power of buyers. 4) The bargaining power
of suppliers. 5) The closeness of substitutes to an industry’s products.

Technological
Stakeholder groups

generic competitive strategies

Cost leadership - lower cost structure than competitors.
. Focused cost leadership- narrow market segment using cost leadership.
3. Differentiation, competitive advantage by providing a product that is different or unique
in some important way
Focused differentiation specializes in serving the needs of just one or two market segments
or niches.

• Horizontal integration - acquiring or merging with competitors

In vertical integration - expands its operations either into an industry producing inputs or
forward into an industry that uses the company’s products

Internal env
Resources
Capabilities - efficiency. • Superior quality. • Superior innovation. • Superior customer
responsiveness
SWOT
Other plg tools and tech
Pestel
Scenario
Situational – 5 c’s
Competitive
BCG

Budgeting
coordination and communication
framework
motivation
efficient allocation of organizational resources.
controlling operations.
check on progress toward the organization’s goals

methods
participative.
An authoritative
A consultative

Characteristics of a successful budget

Alogns with corporate strategy
Realistic numbers
Approved by higher authority
Flexible
Provides performance criteria

Steps
Proposal
Negotiation
Review and approval
Revision

Budgetary slack
underestimating planned revenues and overestimating planned costs

setting stds
Activity analysis. • Historical data. • Target costing. • Strategic decisions. • Benchmarking

Methodologies
A rolling budget is continuously being updated and always covers the same amount of time
in the future
The master budget (also called the comprehensive budget) is the culmination and the goal
of the budgeting process. It is a summarized set of budgeted financial statements, including
the budgeted balance sheet, budgeted income statement, and budgeted statement of cash
flows. Divided into
Operating - Operating budgets are used to identify the resources that will be needed to
carry out the planned activities during the budget period, such as sales, services, production,
purchasing, marketing, and R&D. learning and management – B42
Financial - Financial budgets identify the sources and uses of funds for the budgeted
operations. Financial budgets include the cash budget, budgeted statement of cash flows,
budgeted balance sheet, and the capital expenditures budget.
Capital exp budget - he capital expenditures budget is the budget for long-term capital
expenditures such as property, plant, and equipment.
A flexible budget is a budget that is prepared after the actual level of activity is known.
zero-based budgeting, the budget is prepared without any reference to, or use of, the
current period’s budget or the likely operating results for the current period.
ABB – focuses on activities instead of departements
Project – project is compleyely separate from other elements

Forecasting tech
Regression Analysis – y = a + bx ( Y = dep, X – indep, a – intercept, b – slope )
The coefficient of correlation (r) measures the relationship between two variables. It is a range
between +1 (perfect positive) and -1 (perfect negative).

coefficient of determination is the proportion of the total variation in the dependent variable (y) that
can be explained by variations in the independent variable (x). The value of the coefficient of
determination (r 2 ) range between 0 and 1.

The t-statistic, or t-value, measures the degree to which the independent variable has a valid, long-
term relationship with the dependent variable. The t-value for the independent variable used in a
simple regression should generally be greater than 2.

Std error of estimate – measures dispersion around the regression line

Time Series Analysis cyclical, seasonal, irregular
Smoothing – miles B30
Learning Curve Analysis
Expected Value Analysis
Sec C
Level of activity
Theoritical
Practical
Normal

Variance
Static Budget Variance - Actual - static
1) The flexible budget variance: Actual Results – Flexible Budget Amount 2
2) Sale price Variance - ( AP - SP) AQ
3) ) The sales volume variance: ( AQ - SQ) SP – divided into

Sales Mix variance

AQ * std mix * Sc/ unit
AQ * actual mix * Sc/ unit

Sales qty variance

AQ * std mix * SC/ unit
SQ * std mix * SC/ unit

Direct Materials Variances

1) Price variance - (Sp - Ap)AQ

2) Quantity or efficiency variance -(SQ- AQ)SP

2a) Mix variance* - aq is total of both pdts

AQ * Actual mix * std price

AQ * budgeted mix * std price

2b) Yield variance* -

AQ * Budgeted mix * SP
SQ * Budgeted mix * SP
Direct Labor Variance – same as Dm

3) Rate (price) variance

4) Efficiency (quantity) variance

4a) Mix variance*

4b) Yield variance*

Factory Overhead Variances

Total Variable overhead variance - SQ * V/oh - Actual variable o/h

5a) Variable overhead spending variance - (Actual activity used × Standard rate) − Actual costs

4) 5b) Variable overhead efficiency variance - (SQ- AQ) * V/oh rate

Total Fixed overhead variance - SQ * Fixed o/h rate - Fixed Actual

6a) Fixed overhead spending or budget variance - Budget - actual

6b) Fixed overhead production-volume variance - Master budget costs

Management by exception – focuses attenetion on significant varibles ( fav and unfav)

1) Cost center – the incurrence of costs 2) Revenue center – generating revenues 3) Profit
center – both costs and revenues 4) Investment center – both profit and a return on
investment

allocating common costs

1) Stand-alone allocation - weights for cost allocation by considering each user of the cost as a
separate entity.

2) Incremental cost allocation - weights for cost allocation by considering each user of the cost as a
separate entity.

Net revenues - Variable manufacturing costs = Manufacturing contribution margin - Variable

nonmanufacturing costs = Contribution margin - Controllable fixed costs = Controllable margin -
Non-controllable, traceable fixed costs = Contribution by strategic business unit - Non-controllable,
untraceable fixed costs = Operating income

Transfer price

Methods
• Market price – keeps business units autonomous, preferred by tax auth

• Variable cost- variable costs as the transfer price, only used if the selling division has excess
(unused) capacity

• Full cost - materials, labor, and a full allocation of overhead

Negotiated price

Dual-rate pricing - selling and the purchasing divisions each record the transaction at different prices

Performance Measure

ROI ( rate of return - %)

Income of the Business Unit/ Assets (Investment) of the Business Unit

Residual Income (RI) (absolute amount of return)

Operating income before taxes for the division, project, or investment opportunity – Target return in
dollars: Employed assets of the business unit × required rate of return = Residual Income

Balanced Scorecard

1. The Financial perspective

The Customer perspective
3. The Internal Process perspective
4. The Learning and Growth perspective

SEC D

Prime costs – DM + DL

Conversion costs – DL + O/H

Beginning WIP + Total manufacturing costs – Ending WIP = Cost of goods manufactured

Beginning FG + Cost of goods manufactured – Ending FG = Cost of goods sold.

Predetemined o/h rate – estimated o/h costs/ Estimated DL hrs

Apllied o/h – actual hrs * predertermined o/h rate

Cost Measurement – miles D9, also refer hock 32

1) Standard

2) Normal

3) Actual costing system

Absorption costing

Hock 118

Sales revenue − Cost of goods sold = Gross profit − Variable nonmanufacturing costs (expensed) −
Fixed nonmanufacturing costs (expensed) = Operating Income

How is the income statement presented under variable costing?

Sales revenue − Variable manufacturing costs of items sold = Manufacturing contribution margin −
Variable nonmanufacturing costs (expensed) = Contribution Margin − All fixed manufacturing costs
(expensed) − All fixed nonmanufacturing costs (expensed) = Operating Income

Process costing

Hock – 67

Units in BWIP + Started/Transferred In = Units in EWIP + Completed/Transferred Out

For FIFO, only costs that were actually incurred during the period are included in the amount to be
allocated between units completed and units in Ending WIP. (Costs in BWIP are allocated 100% to
units completed)

For WAVG, the costs allocated between units completed and units in Ending WIP will include those
actually incurred during the period, plus the costs that were in BWIP at the start of the period.

Normal Spoilage – cost added to the costs of the good units that are transferred out to finished
goods (or the next department).

Abnormal Spoilage The costs that have been allocated to the abnormally spoiled units will be
expensed on the income statement in that period as a loss from abnormal spoilage
Adv

easiest, most practical

can aid in establishing effective control

flexible

disadv

time-consuming

can introduce large variances into the costing system if standard costs allocated to the units are not
up to date

job order costing

ABB

Lifecycle costing - Upstream costs 2) Manufacturing costs 3) Downstream costs

Joint and by product

Relative Sales Value at Splitoff Method

Sales Value of Product X/ Total Sales Value of all Joint Products × Joint Costs

Net Realizable Value (NRV) Method

Sales price of items produced that will be sold in the future − Separable costs that are incurred after
the splitoff point = Estimated Net Realizable Value

. Physical Measure

(Gross-Margin) Percentage Method

Step 1: Calculate the gross margin percentage for the total of both (or all, if more than two) of the
joint products to be included in the allocation by subtracting the total joint and total separable costs
from the total final sales value and dividing the remainder by the total final sales value. This is done
for all of the joint products produced during the period, not for all of the joint products sold during
the period. This is the total gross margin percentage.

Step 2: Calculate the gross profit for each of the individual products by multiplying the total gross
margin percentage calculated in Step 1 by each individual product’s final sales value.
Step 3: Subtract the gross profit calculated in Step 2 and any separable costs from each individual
product’s final sales value. The result of this subtraction process will be the amount of joint costs to
allocate to each product.

Shared service cost allocation

Direct method

Step down method

supply chain management

Supply chain management (SCM) is the management of the flow of goods, from the point of origin
to the point of consumption.

Methodologies

MRP – push system, today ERP

Just in time manf – materials arrive exactly as they are needed for in each stage of prodn process.
Demand pull

Lean manufacturing - procedure that centers around limiting waste inside manufacturing
frameworks while at the same time amplifying profitability.

Process

Identify what creates value from the customer’s perspective

· Identify all steps in the value stream (process) - eliminate those that do not create value

· Make the value-creating steps flow smoothly

· Make only what is “pulled” by the customer

· Strive for perfection by continually removing waste

Benefits of LEAN MANUFATURING

Resource optimization

· Reduced waste

· Improved process flow

· Reduced costs

· Increased customer value

Kanban -visual record/ card to signal need for specified qty of material.

Outsourcing – capitalize on expertise of another company

Theory of constraimts

methodology for identifying the most important limiting factor (i.e. constraint) that stands in the
way of achieving a goal and then systematically improving that constraint.

Drum-buffer-rope (DBR) system - TOC method for balancing the flow of production through the
constraint. The drum is the constraint; the rope is the sequence of processes prior to and including
the constraint; and the buffer is the minimum amount of work- in-process input needed to keep the
drum busy

Steps

Identify, exploit, subordinative, elevate, repeat

Throughput costing

recognizes only direct materials costs as being truly variable and thus relevant to the calculation of
throughput margin

 Capacity management refers to the act of ensuring a business maximizes its potential
activities and production output—at all times, under all conditions.

Value chain analysis

· Value chain - System of interdependent activities, each intended to add value to the final
product or service

VCA - gathering, evaluating, and communicating information to help managers envision an

organization’s future and implement decisions to gain and sustain competitive advantage.

Steps

1) Internal cost analysis – sources of profitability and relative cost of internal processes
2) Internal differentiation analysis – creating and sustaining differentiation
3) Vertical linkage analysis – upstream and downstream value creating processes

Process analysis

Effectiveness

Efficiency

Adaptability

Process reeingeenering – eliminate unnecessary steps

Business process reeingeerning cycle –

Identify process – review, update, analyse – design – test and implement

Benchmarking – best in class performance of industry leaders or internal benchmarking

Activity-based management

Using analysis to identify root causes of activity costs

Continuous improvement (Kaizen) concepts

“staircase of improvement”

examines every process, beginning with the most important, and then improves each of them
individually to improve the total enterprise

Best practice analysis

the collective steps in a gap analysis, which is the difference between the current state, or
current practices, and a desired state, or best practices.

Cost of quality analysis

Prevention costs - Costs of quality system design, implementation, and maintenance,

including audits of the quality system itself - Quality planning, review of new products,
surveys of supplier capabilities

Appraisal costs - Costs of auditing processes for quality, including formal and informal
measurements and evaluations of quality levels and setting quality standards and
performance requirements - Inspection and testing of raw materials, WIP and Finished
Goods

Internal failure costs - Costs involved with defective products and components that are
caught before shipping them to the customer - Scrap, rework, spoilage, retesting, and
reinspection

External failure costs - Costs involved with shipping a defective product to a customer.-
Customer complaints, returns, product recalls, and warranty claims
SEC – E

internal control - reasonable assurance

Objectives –

1) Operations 2) Reporting 3) Compliance

Components (crime)

1) Control environment 2) Risk assessment 3) Control activities 4) Information and

communication 5) Monitoring activities

Regulation for ic
Foreign Corrupt Practices Act (FCPA)
1) anti-bribery provisions (1977) - (bribes) to any foreign official
2) accounting provisions (2002). ( apply to all U.S. companies that are regulated by the SEC) -
maintain books, records and accounts that accurately and fairly reflect transactions and to
develop and maintain a system of internal accounting control.

Structure of iC – E10 miles

Sarbanes-Oxley Act -to all publicly-held companies in the U.S see miles E - 26
SOX Section 302 – Makes officers responsible for iC
Section 404(b) requires the company’s independent auditor to report on and attest to
management’s assessment of the effectiveness of the internal controls

Services outside scope of auditors

Bookkeeping services or other services relating to keeping the accounting records or
preparing the financial statements of the audit client. • Financial information systems design
and implementation. • Appraisal or valuation services, fairness opinions, or contribution-in-
kind reports. • Actuarial services. • Internal audit outsourcing services. • Management
functions. • Human resource services. • Broker/dealer, investment adviser, or investment
banking services. • Legal services. • Expert services unrelated to the audit. • Any other
service that the Public Company Accounting Oversight Board (PCAOB) determines, by
regulation, is not permissible

SOX Section 203 audit partner rotation - lead audit partner and the concurring review audit
partner - rotate and remain of five years.
Other audit partners - rotate after seven years and remain off for two years

segregation of duties
 1. Authorizing a transaction. 2. Recordkeeping: Recording the transaction, preparing source
documents, maintaining journals. 3. Keeping physical custody of the related asset: For
example, receiving checks in the mail. 4. The periodic reconciliation of the physical assets to
the recorded amounts for those assets.

Limitations of ic
Competence
Obsolescence
Collusion
Override by mgnt
Cost constraints

Corporate governance - spells out the rules and procedures to be followed in making decisions for
the corporation.

BOD and audit committee – miles E 25

physical access controls

ID card

door can be kept locked

Keys may be issued to authorized personnel

smoke and water detectors, fire suppression devices, burglar alarms and surveillance cameras
monitored by security personnel.

external auditor's opinions

Unqualified - financial statements are present fairly, in all material respects

Qualified – A qualified opinion contains an exception, meaning that the financial statements do not
present a true and fair picture.

Adverse – financial statements, taken as a whole, are not presented in conformity with generally
accepted accounting principles.

Disclaimer – auditor has not been able to gather enough information on the financial statements to
express an opinion
Inherent risk –natural in an element of the financial statements or the function being audited,
assuming that there are no controls.

• Control risk –internal control will not prevent or detect a material misstatement in a timely
manner.

• Detection risk – risk that the auditor through audit testing will not detect a material misstatement
in an account balance or class of transactions that could result in a material misstatement to the
financial statements. Audit risk, therefore, is calculated as follows: AR = IR × CR × DR

Types & Methods of Internal Control

Preventive Controls - Help “prevent” errors and misappropriation of assets

Detective Controls - Back up preventive controls by “detecting” errors once they occur

Corrective Controls - “Correct” problems identified using detective controls

Directive Controls - In contrast to controls that prevent, detect, and correct negative results,
directive controls are instructions designed to produce positive results

Compensating Controls - Also called mitigating controls; “compensate” for shortcomings elsewhere
in the control structure

Classification of Controls

General controls –

Organizational, personnel, and operations controls

Systems development controls

Network, hardware, and facility controls,

Backup and disaster recovery controls,

Accounting control

Application controls

Input controls - Reasonableness checks, Pre-numbered forms, check digits

• Processing controls – batch totals, hatch totals, Batch balancing i

• Output controls - Reconciliation

 Aging

 Suspense File

 Suspense Account

 Periodic Audit

 Discrepancy Reports

Feedback controls produce feedback that can be monitored and evaluated to determine if the
system is functioning as it is supposed to.

A feedback loop is a part of a control system. It uses feedback to measure differences between the
actual output and the desired output.

A feedforward system attempts to predict when problems and deviations will occur before they
actually occur.

Internet Security

Firewall

Antivirus software

Encryption

Encryption converts data into a code and then a key is required to convert the code back to data

methods of software encryption

Secret key system - the same key is used to encrypt and decrypt messages

Public/private key system - uses two different keys (one public, one private) to encrypt and decrypt
messages

- Trojan horses and viruses is that Trojan horses do not replicate themselves
- virus and a worm is that the virus requires an infected host file in order to replicate itself,
while the worm can replicate itself without a host file.

Business Continuity Planning

backup of data and the recovery of data

 Disaster Recovery

A hot site is a backup facility that has a computer system similar to the one used regularly and it
must be fully operational and immediately available.

A cold site is a facility where all of the needed equipment can be installed, though the equipment
and the necessary telecommunications are not immediately available.

A warm site has the computer equipment and necessary data and communications links installed,
but does not have live data.

Flowcharting – miles, E 49

SEC F

AIS - to collect, store and process the accounting and financial information

- produce f/s and reports

AIS Cycles

• Revenue to Cash Cycle

• Expenditure Cycle

• Production Cycle

• Human Resources and Payroll Cycle

• Financing Cycle

• Property, Plant & Equipment (PP&E) Cycle

• General Ledger and Reporting System

  Modern AIS - integrated approach wherein financial and nonfinancial information can be
linked within a single information system which is Enterprise Resource Planning (ERP)
system

 Greater computing capabilities and larger storage

Enterprise Resource Planning (ERP)

process that helps the businesses integrate and manage different functional areas such as
finance, marketing, operations and human resources.

• greater synchronization of information

• Real-time Information

• Widely Distributed-Enables Collaboration and teamwork

• Learning is Simple

• Lower operational costs – Simplified System Maintenance

Database Management System (DBMS)

A database is a place where all the data gets stored in a structured format

DBMS is an interface b/w database and applications programs that access the database.

Databse scehma/ blueprint – defines the databse logical structure

Data Warehouse

 Set of large databases consisting of detailed and summarized , Repository or storage

location.

Enterprise Performance Management (EPM)

Process that facilitates the linking of an organization's strategies to specific plans and
actions.

Several key sub-processes

 Planning, budgeting, and forecasting

 Performance reporting

 Profitability and cost analysis

Data governance
 Set of defined procedures, policies, rules, and processes that oversee the following
attributes of an organization's data. Manage –

Availability- Ability to make data accessible

Usability -Delivered to end-users in formats and structures – Software

Integrity- Accuracy and consistency of data

Security - How data is protected – Unauthorized Access – Corruption

Data Stewards should be selected during the Implementation

• Data security can be aided by using a defense‐in‐depth approach

Data governance FRAMEWORKS

COSO's Internal Control-Integrated Framework

provides guidelines, i/c over data governance

 Objectives - Operations, Reporting, and Compliance with applicable laws and regulations

 Entity Structure - I/C over data governance should be implemented at all levels of the
organization, including the entity, divisions, operating units, and individual functions

 Components -

a. Control environment -depends on good leadership and culture

b. Risk assessment - companies need to identify risk

c. Information and communication - information quality throughout the company

d. Monitoring activities - companies need to monitor and adapt controls to respond to

changes in the environment

e. Existing Control activities - specific policies & procedures put in place to ensure data
governance

ISACA's Control Objectives for Information and Related Technologies (COBIT) –

ISACA (Information Systems Audit and Control Association) created a best-practice framework called
COBIT to guide information technology (IT) management and governance

detailed set of manuals for creating, implementing, and maintaining IT‐related controls

PRINCIPLES

1: Meeting Stakeholder Needs

Principle 2: Covering the Enterprise End-to-end

Principle 3: Applying a Single, Integrated Framework

Principle 4: Enabling a Holistic Approach

Principle 5: Separating Governance From Management

Data Life Cycle

 Data Capture - In order to be analyzed, data must first be recorded or captured

 Data Maintenance - Data must be converted to a usable form.

 Data Synthesis - Data modeling or using inductive reasoning to transform data.

 Data Usage – Using data to support the mission of the business

 Data Analytics - With the purpose of creating new information and generating business
insight.

 Data Publication - Sending data outside the organization

 Data Archival - Removing data from active use to be stored for potential future use

 Data Purging - Deleting data that is no longer useful or needed

Cyberattack Detection and Prevention

How can companies protect themselves from these attacks?

 Penetration testing - Determine where the company is vulnerable to attack.

 vulnerability testing - to identify existing vulnerabilities, does not attempt to assess if and
how the vulnerability could be exploited.

 Biometric Identification -Each information system user should authenticate themselves to

the system.

methods of authentication

something you know such as a password,

 something you have such as an identification card,

 something you are such as your fingerprint, retina scanning.

 Firewalls –Firewalls use the concept of defense‐in‐depth in that security features are set in
successive layers so that if one level of security is breached, there is another layer right
behind it to stop the attack.

Systems Development Life Cycle (SDLC)

 Structured road map for designing and implementing a new information system.
  Systems / Requirement analysis – identifying needs and assembling info

 Conceptual design – plan, alternatives

 Physical design – detailed specifications

 Implementation and conversion – installation of new system

 Operations and maintenance – running system and checking performance

 Business process analysis – Systematic method to study all of a company’s business

processes to determine how they can be improved.

 There are four basic steps:

 Clearly identify the process, who is involved, and what is currently being done with a
clearly defined starting and ending point.

 Do a walk‐through of the process to document it clearly and fully

 Examine the current process to identify strong areas and areas that can be improved, such
as bottlenecks, friction points, and weaknesses

 Based on the analysis, propose a plan for improvement

Robotic Process Automation (RPA)

 Use of software/bots to complete routine, repetitive tasks

 Robots are really just a set of automated instructions designed to manipulate machines or
data sources to achieve a specified task.

 Primary benefits of RPA:

 Quicker completion of tasks

 Leaves Audit trail of all actions

 Consistency

 Frees humans from doing boring and repetitive tasks

 Uninterrupted Work

 Drawbacks of RPA:

 Requires frequent updates.

 Initial investment is high

Artificial Intelligence (AI)

 AI involves computers performing tasks requiring critical analysis and pattern recognition. It
can be used to analyze various inputs and provide a recommended decision.

PROS of AI

 greatly increases speed

  much lower error rate

 AI systems provides transparency throughout an accounting process

 AI can improve accounting processes are in data entry and analysis and in reducing fraud

 AI systems is that they can “learn” from their mistakes

CONS of AI

 few commercially available products

 create their own software is expensive

Cloud Computing

 network of remote servers that are connected by the Internet

 The remote servers are used to store, manage, and process data.

Software as a Service (SaaS) - delivering and licensing software through online

applications, in an “on-demand format,” rather than installations on individual computers.

Blockchain

connects consumers & suppliers directly

transaction represented as blocl – broadcasted to every party – paerties authenticate – block asdded
to chsin –

adv

High transparency

permanent record

reducing redundancy and delays

cost savings versus maintain physical records

disadv

 complex

 Regulatory clearance and implications are unknown

Implementation and training

Cryptocurrency – mines by miners

Data Analytics

I) Business Intelligence
 Big Data -Refers to datasets which are extremely large and/or complex
 Big data is broken down into four dimensions: Volume – qty
 Velocity – speed
 Variety - types
 Veracity – quality

Data Structure

 Structured data -Data that has been placed into a relational database

 Semi-structured data - Does not have neat, organized fixed fields like structured
data. Exp – XML

 Unstructured data - Unorganized and is not easily searchable. Exp – text messages,
audio

Business intelligence

transform data into actionable information

data – info – knowlwdge – insight - action

Data Analytics

organizing data and using analysis techniques to identify and understand relationships,
patterns, trends, and causes

II) Data Mining

Using analytic tools on large data sets, querying a lot of data to find patterns,
relationships, and insights.
Sql – commands -¸SELECT, FROM, WHERE

III) Analytic Tools

IV) Descriptive Analytics - Form of data analytics which aims to answer “What happened?”
V) Diagnostic Analytics - Form of data analytics which aims to answer “Why did it
happen?”
VI) Predictive Analytics - Form of data analytics which aims to answer “What will happen?”
Prescriptive Analytics - Form of data analytics aims to answer “How can we make it
happen

WHEN TO use analytical tools

- Clustering – grouping similar obj together
- Classificvation – predict which category item belongs to
Regression – coreelation of outcome of dep variable with indep variable

IV) Data Visualization

Data tables – best practices – plg, focus, alignment, size, cluster, colour,

Data visualisation tools –

 Comparisoms
Bar chat – categories or time
Pir chart – proportional categories

Distributions
Histogram - frequency of variable
Dot plot – vertical dots to represtent distribution
Box plot – min data point, lower quarter, median, third quartile, max data point

Locations
Maps and filled maps

Relationships
Scatter plot
Bubble chart
Heat map