ACC 444 - CH 10 (Processing Integrity and Availability Controls)

What is a validity check?

An edit test that compares the ID code or account number in transaction data with similar data in the master file to verify that the account exists. (ie: if product # 65432 is entered on a sales order, the computer must verify that there is indeed a product by that number in the inventory database).

What phrase highlights the importance of input controls?

"Garbage in, garbage out". If the data entered into a system are inaccurate, incomplete, or invalid, the output will be too.

What are the 3 commonly used type of batch totals?

1) Financial total-sums of a field that contains monetary values, such as the total dollar amount of all sales for a batch of sales transactions. 2) Hash total-sums a nonfinancial numeric field, such as the total of the quantity ordered field in a batch of sales transactions. 3) Record count-the number of records in a batch.

What are the 3 batch processing data entry controls?

1) If the transactions are sorted so that the accounts affected are in the same sequence as records in the master file. 2) An error log that identifies data input errors (date, cause, problem) facilitates timely review and resubmission of transactions that cannot be processed. 3) Batch totals summarize numeric values for a batch of input records.

What are the 3 process stages of the application controls for processing integrity?

1) Input, 2) Processing, 3) Output.

What are the 3 online data entry controls?

1) Prompting-an online data entry completeness check that requests each required item of input data and then waits for an acceptable response before requesting the next required item. 2) Closed-loop verification-checks the accuracy of input data by using it to retrieve and display other related information (ie: if a clerk enters an acct number, the system could retrieve and display the acct name so that the clerk could verify that the correct acct number had been entered). 3) A transaction log includes a detailed record of all transactions, including a unique transaction identifier, the date and time of entry, and who entered the transaction.

What are 2 particularly important form design controls?

1) Sequentially prenumbering source documents, 2) Using turnaround documents.

What is a turnaround document?

A record of company data sent to an external party and then returned by the external party for subsequent input to the system.

What is a completeness check (or test)?

An edit check that verifies that all data required have been entered. (ie: sales transaction records should not be accepted for processing unless they include the customer's shipping and billing address).

What is a sign check?

An edit check that verifies that the data in a field have the appropriate arithmetic sign. (ie: quantity ordered field should never be negative).

What is a sequence check?

An edit check that determines if a batch of input data is in the proper numerical or alphabetical sequence.

What is a size check?

An edit check that ensures the input data will fit into the assigned field. (ie: 458,796,253 will not fit into an 8 digit field).

What is a limit check?

An edit check that tests a numerical amount against a fixed value. (ie: the hourly wage field should be greater than or equal to minimum wage).

What is a range check?

An edit check that tests whether a data item falls within predetermined upper or lower limits. (ie: a marketing promotion might be directed only to prospects with incomes between $50,000-$99,999).

What is a field check?

An edit check that tests whether the characters in a field are of the correct field type. (ie: a field for a zip code should not contain alphabetic characters).

What is a check digit?

Authorized ID numbers (such as employee numbers) can contain a check digit that is computed from the other digits. (ie: the system could assign each new employee a 9 digit number, then calculate a tenth digit from the original 9 and append that calculated number to the original 9 to form a 10 digit ID number).

What is a reasonableness test?

It determines the correctness of the logical relationship between two data items. (ie: OT hours should be zero for someone who has not worked the maximum number of regular hours in a pay period).

Input controls

Only authorized personnel acting within their authority should prepare 1) source documents; 2) Form design, 3) cancellation and storage documents, and 4) automated data entry controls are needed to verify the validity of input data.

Why is sequentially prenumbering source documents important?

Prenumbering improves control by making it possible to verify that no documents are missing. The system should be programmed to identify and report missing or duplicate source documents.

What is check digit verification?

Recalculating a check digit to verify that a data entry error has not been made.

What is form design?

Source documents and other forms should be designed to minimize the chance of errors and omissions.

What is data entry controls?

Source documents should be scanned for reasonableness and propriety before being entered into the system. This manual control must be supplemented with automated data entry controls like 1) a field check, 2) a sign check, 3) a limit check, 4) a range check, 5) a size check, 6) a completeness check (or test), 7) a validity check, 8) a reasonableness test, 9) a check digit.

What is cancellation and storage of source documents?

Source documents that have been entered into the system should be canceled so they cannot be inadvertently or fraudulently reentered into the system. Paper documents should be defaced (ie stamp "paid"), electronic documents should be canceled (ie set flag to indicate doc already processed). Original source documents (or electronic images) should be retained for as long as needed to satisfy legal and regulatory requirements and provide an audit trail.

What is processing integrity?

The processing integrity principle in the Trust Services Framework states that a reliable system is one that produces information that is accurate, complete, timely, and valid.

What is a batch total?

The sum of a numerical item for a batch of documents, calculated prior to processing the batch, when the data are entered, and subsequently compared with computer-generated totals after each processing step to verify that the data was processed correctly.

Why is using turnaround documents important?

Turn around documents are prepared in machine-readable form to facilitate their subsequent processing as input records. They improve accuracy by eliminating the potential for input errors when entering data manually.