Cash Registers Balance Forms

							Chapter 14

System Controls
               A Quote

“The factory of the future will have only
two employees, a man and a dog.
The man will be there to feed the dog.
The dog will be there to keep the man
from touching the equipment.”
                       Warren Bennis
             Learning Objectives
   To understand controls in computer-based
    accounting systems.
   To learn the objectives of system controls -
    preventive, detective, corrective.
   To study general controls and application
    controls.
           System Controls

   Internal Controls implemented in a
    computer-based accounting information
    system are called system controls.
          Objectives of Controls
   Preventive Controls
    » e.g. credit card approval check, valid account
      check, valid purchase order check, check
      authorization, segregation of duties ...
   Detective Controls
    » e.g. Trial balance, using pre-numbered forms,
      requiring documentation of program changes...
   Corrective Controls
    » e.g. policy of writing an adjusting entry to correct
      an error found in the trial balance, procedures to
      change a program...
            Scope of Controls

   General Controls
    » Controls affecting all applications
   Application Controls
    » Controls specific to applications
     What are some of the General
              Controls ?
   Organization of the MIS department such that
    there is segregation of duties
    » Systems Analysts and Programmers
    » Computer Operators and Programmers
    » Data Control and Librarian
   Procedures for system and program changes
    »   Formal review and authorization for new systems
    »   Adequate documentation
    »   Formal testing procedures for new and modified systems
    »   Authorization and documentation for changes made in
        systems
        General Controls Contd...

   Hardware controls
    »   Parity check
    »   Dual read
    »   Read after Write
    »   Echo check
       General Controls Contd...
Access Controls
 Segregation of duties
 Identification and Authentication Procedures
    » Userid and password
    » Automatic callback
    » Limited data file access - read/write access
   Physical security
    » only authorized personnel should be allowed to enter
      the data center, tape library, computer operations
      desk.
     General Controls Contd...

   Other data and procedure controls
    » File backup procedures.
    » Batch and Batch with on-line inquiry - grandfather-
      father-son technique.
    » On-Line real time systems - file dumps and
      transaction logs.
      General Controls Contd...

Contingency Plans
   Adequate insurance for lost equipment, software and
    business loss.
   Designated alternative processing location.
   Identifying vital applications.
   Off-site storage location.
   Assigning responsibility to carry out the contingency
    plan.
     What are some of the
    Applications Controls ?

 Input Controls
 Processing Controls
 Output Controls
                      Input Controls
Data Validation (preventive control)
   Field check (e.g. Numeric field should contain numeric data)
   Validity check (e.g. Valid account numbers)
   Sign Check (e.g. positive)
   Limit check (e.g. age field should be between 20 and 65, weekly hours
    worked should be less than 80,
   Sequence check (e.g., check no., transaction no.)
   Completeness check (no blank amounts or no blank accounts)
   Default values e.g. if a field is blank, assume a default value.
        Input Controls Contd...

   Check Digits
    » self checking number (modulus 11)
   Control Totals (used in detective controls)
    » Batch total - used in a batch system.
    » Amount or Quantity total - serves as control total
      and used for decision maker.
    » Hash total - only serves as control total e.g. sum of
      account numbers.
    » Record count.
        Input Controls Contd...

Direct data entry procedures
   Source input documents. e.g. Optical character
    reader for multiple choice exam forms
   Turnaround documents (magnetic ink character
    reader)
   Point of sale data entry (Cash registers acts as
    computer terminal)
    Processing Controls

   Sequence Checks
    » confirms the sort order
   Run-to-run Controls
    » uses control totals
   Physical File Identification
    » external file labels
    » internal file labels
   Programmed Controls
    » crossfooting check
             Output Controls

   To ensure the accuracy of the results of
    processing.
   To ensure that only authorized personnel
    receive the reports produced by an application.
   Performed by data control group.
   Output distribution log.
End of Chapter 14