Question

#1 Two distinct ways to structure the data processing function are ____________________ and ____________________.

#2 Sarbanes-Oxley legislation requires that management designs and implements controls over the entire financial reporting process. What systems does this include?

#3 What is discretionary reporting?

Accounting Information Systems Homework

Answer 1

#1 Answer to the first question

The two distinct ways to structure the data processing functions are Real Time Processing and Batch Processing .

Explanation for the underlined terms.

Real Time Processing - In Online Real Time Processing the data (accounting transactions) are processed as soon you record the transactions. That means data is processed on a real time basis.

Batch Processing - In Batch Processing the transactions are recorded as and when they occur but processing of transactions happens on a periodic basis like weekly, daily (end of the day) or monthly.

#2 Answer to the second question

Sarbanes - Oxley Legislation

The Sarbanes and Oxley Legislation in short the SOX Act 2002 framed for the protection of investors and prohibition of fraudulent accounting activities by corporations.

The Act calls for the following important reforms in the system of accounting.

Section 302 - The senior corporate officers must personally certify the financial statements of the company.

Section 404 - Management and auditors should ensure proper internal control and reporting methods and also ensure the adequacy of the same.

Section 409 - In case of any significant change in financial or operation condition quick disclosures should be made.

Section 802 - Criminal penalties for knowingly altering documents to mislead stakeholders

Section 906 - Criminal penalties for certifying a misleading financial report.

Even though the Act does not directly instruct installation of an effective Accounting Information System (AIS) and it is left to the discretion of the company and management, it will be difficult to follow the norms specified without an effective accounting system.

In order to ensure proper implementation of section 404 it is effective if you install a good AIS. Section 302 and 404 indirectly requires the scrutiny of an AIS.

Therefore it is not mandatory to install an Accounting Information System but it is an effective way to ensure compliance.

#3 Answer to the third question

Discretionary Reporting

When reports are provided to the internal management that is non compulsory or non legal it is called discretionary reporting. It is not mandatory for preparing such reports and neither is it a legal requirement, but it is prepared by the company clearly on the basis of the judgement of their management, acting on their own authority.

Since, it is the in the discretion of the management to prepare such reports, hence the name discretionary reporting. These can be used to make informed and effective decisions by the management.