Accounting Information System

Q:

(1) What are general controls? Give an example.

(2) What are application controls?

(3) In evaluating application controls, the methodology of one of the Big Five public accounting firms differentiates between the point in the system at which the control is "established" and the later point at which that control is "exercised." Speculate about the meaning of the terms establish a control and exercise a control by discussing those terms in the context of:

    a. Batch total procedures

    b. Use of prenumbered documents

    c. Turnaround document.

A:

(1)Controls designed to make sure an organisation’s control environment is stable and well managed. General controls are common controls that apply to all sizes of systems, from large to complex mainframe systems to client/server systems to desktop and laptop computer systems.

Examples would be Change Control Management, Data Backup procedures

(2)Programmed procedure in application software that prevent, detect and correct transaction errors and frauds. They are concerned with the accuracy, completeness, validity and authorisation of the data captured..

(3)

a. We establish the control when we calculate the original batch total. We exercise the control when we reconcile the original batch total with a total calculated at some later point in the process.

b. We establish the control when we prepare a pre-numbered document. We exercise the control when we later account for the integrity of the completed forms.

c. The control is established when the turnaround document is prepared and dispatched. The control is exercised later when we process the returned document.