Question 1 (60 marks) – Development of Accounting : You are a Systems Accountant

ID: 2418864 • Letter: Q

Question

Question 1 (60 marks) – Development of Accounting:
You are a Systems Accountant working as an independent consultant. You have been approached by a local small wholesaler who has grown significantly since they opened their business 5 years ago. Using the article by Kinkela (Kinkela, K. Journal of Finance and Accountancy 14 (Oct 2013)) as a starting point, provide a research report to the business that outlines the following:

• Differences between a cloud based accounting system and a traditional accounting system
• Advantages of a cloud based accounting system
• Potential risks in adopting a cloud based accounting system

Based on your findings make a recommendation on the use of a cloud based accounting system for the wholesaler.

Question 2 (40 marks) – Internal Controls:
You have recently started in a new organisation as a Financial Accountant. Part of this role involves supervising the General Accounting Team. This team is responsible for the day to day accounting functions and period end reporting to management. You have early concerns about internal controls within the existing process. You have decided to undertake an initial internal audit of the General Ledger and Reporting process, specifically focusing on reliability, completeness and validity of the process. The scope of the investigation is to review:

a) Master file data
b) General Ledger Postings
c) Period End Postings
d) Reporting

Provide a 1,500 word business report to your manager, the Financial Controller, identifying potential internal control risks that may exist in each of the areas above (a-d). You must also recommend appropriate internal control measures to mitigate the identified risks.

Explanation / Answer

Differences between a cloud based accounting system and a traditional accounting system

Area

Traditional Accounting Software

Cloud based Accounting Systems

Place of Accounting

Usually users own/ leased business premises.

In Cloud based servers.

Accounting Personal

Users hires them in their payroll

Cloud based Accounting Software MIS takes care of the same.

Data Storage and Security

Responsibility is of user or the third party who maintains the software

Cloud Service Provider is owner’s responsibility.

Reporting and Accountability

User is responsible

Cloud based software provides MIS.

Accounting Software Licensing

User is the owner of the software

User is the tenant of the software. Cloud Service Provider is owner.

System Location

User chooses the location of system

Cloud. Server is located in any place.

Maintenance Costs

User since owner need to spend on occurrence of cost

Same will be included in SLA and service provider bares the cost of occurrence.

IT resources

Could be of user own or Service Provider hired by user

Service provides the same.