Evaluating Accounting Systems – Ensuring Financial Data Integrity in Small and Large Businesses

How does an accounting system provide accurate calculations to prevent errors?

An accounting system provides accurate calculations through double-entry bookkeeping, where every transaction is recorded in at least two accounts, through error-checking features to catch potential mistakes, and through reconciliation processes to identify and correct any discrepancies.

What are potential concerns related to data security?

Some of the potential concerns related to data security include unauthorized access to sensitive financial data, data breaches leading to theft or manipulation of records, lack of backup and disaster recovery procedures, and vulnerabilities in software infrastructure.

How does an accounting system save time?

An accounting system saves time by automating repetitive tasks, generating reports instantly, tracking transactions in real time, and providing easy access to historical financial data for analysis and decision-making.

How does using an accounting system enable the separation of duties?

Accounting systems enable the separation of duties by restricting access and permissions. Further, they automate workflows and create audit trails for a document regarding who performed which actions (Nazarova et al., 2022). Notably, this helps identify and prevent errors or fraud.

What are the benefits of an ERP system?

An ERP system integrates data management, streamlines business processes, facilitates real-time reporting, improves productivity, enhances decision-making, and provides better visibility across the organization.

What are the benefits of QuickBooks?

QuickBooks have various benefits, such as easy invoicing, automated bookkeeping, tax preparation, expense tracking, and generating financial reports. Notably, all this is done in a user-friendly interface for small businesses.

Variance and Anomalies Questions

How can an accounting system help you find anomalies or variances in financial data?

Accounting systems can identify anomalies or variances through features like automated variance analysis, comparing actual versus budgeted/forecasted figures. Further, this can be done through exception reporting to flag unusual transactions or account balances and trend analysis to spot unexpected changes over time.

Assume you calculated a financial ratio variance of 2x the usual balance for accounts receivable. Why did you calculate a financial ratio variance of 2x the usual balance?

A 2x variance in the accounts receivable ratio could indicate issues such as slower customer payments, inadequate credit controls, potential bad debts, and inaccurate revenue recognition. Notably, this significant deviation from the normal range warrants further investigation to identify the root cause.

You are a small company that calculates a normal current ratio of 1.95. This period the current ratio is only 1.45. Why has the ratio decreased?

A decrease in the current ratio from 1.95 to 1.45 suggests the company may have increased short-term liabilities or reduced current assets. Notably, this is a potential liquidity issue that requires further analysis to identify the underlying causes.

References

Nazarova, H., Kashchena, N., Nesterenko, I., Kovalevska, N., & Kashperska, A. (2022). Theoretical and methodological aspects of improving the functioning of the accounting system. Amazonia Investiga, 11(54), 243-255.

Overview

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Question

Financial statement integrity, or ensuring relevant and reliable information is reported, is the goal of an accounting system. There are many benefits to using an accounting system to track your data over the traditional way of using Microsoft Excel or paper. Some of these include fewer errors in data security, fewer errors in calculations, and an enhanced ability to perform variance analysis on your data. The traits of an effective accounting information system are cost-effectiveness, usefulness, and flexibility.

Evaluating Accounting Systems – Ensuring Financial Data Integrity in Small and Large Businesses

Directions
In this assignment, you will explore how accountants use an accounting system to ensure they have financial data integrity. You will respond to the questions in the Module Six Worksheet Template provided in the What to Submit section by evaluating different accounting systems. Consider that a small company may only have one or two users in QuickBooks, whereas a large company may have hundreds when using SAP or Oracle.
Specifically, you must address the following rubric criteria:
1. Explain how an accounting system provides accurate calculations to prevent errors.
2. Identify potential concerns related to data security.
3. Explain how an accounting system saves time.
4. Explain how using an accounting system enables separation of duties.
5. Describe the benefits of an enterprise resource planning (ERP) system (Oracle or SAP).
6. Describe the benefits of an entry-level system (e.g., QuickBooks).
7. Explain how an accounting system can help you find anomalies or variances in financial data.
8. Explain why you calculated a financial ratio variance of 2x the usual balance. Assume the calculated financial ratio variance of 2x the usual balance for accounts receivable.
9. Provide a rationale for why the ratio decreased. For a small company that calculates a normal current ratio at 1.95, this period the current ratio is only 1.45.
What to Submit
Using the Module Six Worksheet Template, complete the chart by quoting or paraphrasing information from readings. Include at least one reference. Sources should be cited according to APA style.

Evaluating Accounting Systems – Ensuring Financial Data Integrity in Small and Large Businesses