Application Systems
Name an application system that your client uses for financial reporting
- SAP
- Oracle
- Hyperion
etc.
What is a data flow?
Systemic and manual flow of transactions, interfaces or data flows from subsidiary ledgers to the general ledger(s), and Interfaces or data flows from the general ledger(s) to reporting packages and/or the consolidating trail balance.
As part of obtaining an understanding of the entity’s selection and application of accounting principles, including related disclosures, we should evaluate whether the entity’s selection and application of accounting principles are applicable for its business and consistent with the applicable financial reporting ________ and accounting principles used in the relevant industry.
Framework
Other acceptable answers: standards, principles, or policies
How could you identify the relevant controls in a process?
- process narratives
- process flow diagrams
Name 2 benefits of using an application system
- maintains and controls business
- improves efficiency
- removes human error
- increase profit
- reduce HR
- measures business productivity
What is this a picture of?
How data flows through the financial reporting process
How does a company inform their financial statement users of their applicable accounting policies?
10K/Q, disclosures, etc.
True or False: The purpose of review (in a CRE) is to verify specific amounts
False: Purpose of review is to identify potential issues NOT specific amounts
What audit considerations would you have to get comfortable relying on a client's application system?
- test GITCs
What is a benefit of understanding the data flows of your client?
- identify gaps in process
- identify RoMMs
- identify where and what controls are applicable to address those risks
What risks are related to a company's selection of their accounting policies?
- judgement involved in selecting and applying accounting policies
- can involve management estimates and assumptions
- risk in emerging and controversial areas
- implementation of new accounting policies
What type of control (for example reconciliation, verification etc.) would typically be most important at the financial reporting level?
Control with a Review Element (CRE)