Lecture Notes: Accounting in CIS Environment - Expenditure Cycle

Introduction

• Subject: Accounting in CIS Environment
• Week 9: Topic on Expenditure Cycle (Purchasing to Cash Disbursement)
• Final parts of the semester

Previous Lessons Recap

• Lesson 5: Computer Fraud
• Lesson 6: Computer Fraud and Abuse Techniques
• Lesson 7: Control and Accounting Information System
• Lesson 8: Revenue Cycle (Sales to Cash Collection)
• Upcoming: Conversion and Payroll Cycle, Financial Reporting Management Cycle, Electronic Commerce, Enterprise Resource Planning System

Learning Objectives

1. Discuss the Overview of Flow Expenditure Cycle
2. Discuss Integration of Technology in Expenditure Cycle
3. Identify Different Threats of Disbursement Process
4. Discuss Different Disbursement Controls

Overview of Expenditure Cycle

• Definition: Recurring set of business and related information processing operations associated with purchase and payment for goods and services
• AIS (Accounting Information System) supports effective and efficient performance of business activities

Key Processes in the Expenditure Cycle

1. Ordering Goods, Supplies, and Services

   • Decision Points: What, when, and from whom to purchase
   • Inventory Control Methods: Economic Order Quantity (EOQ), Just in Time (JIT), Materials Requirement Planning (MRP)

2. Receiving and Storing Items

   • Compare Purchase Order with Delivery Receipt
   • Create Receiving Report
   • Recognize Accounts Payable

3. Approving and Paying for Items

   • Vendor Invoice Approval
   • Disbursement Voucher System vs. Non-voucher System
   • Payment Methods: Checks, Electronic Fund Transfer (EFT)

Integration of Technology

• Benefits: Increased efficiency, accuracy, visibility, process optimization
• Challenges: High implementation cost, employee resistance, integration issues, cybersecurity risks
• Role of Technology: RFID, Inventory Management Software, EDI (Electronic Data Interchange)

Threats in the Disbursement Process

• General Threats: Data processing integrity control, restriction of access to master data
• Control Objectives: Authorization, validity, proper recording, safeguarding assets, compliance

Specific Threats and Controls

1. Ordering Threats

   • Inaccurate inventory records, unnecessary items, inflated prices, inferior quality
   • Controls: Perpetual inventory system, barcoding/RFID, competitive bidding

2. Receiving Threats

   • Unordered items, counting mistakes, inventory theft
   • Controls: Approved purchase order, RFID tags, proper documentation

3. Approving Invoices

   • Errors in invoices, posting mistakes
   • Controls: Verification of accuracy, reconciliation with ledgers

4. Cash Disbursement Threats

   • Unauthorized transactions, fraud
   • Controls: Dual authorization, bank reconciliation, fraud detection algorithms

Summary

• Discussed expenditure cycle and related processes
• Highlighted integration of technology and its benefits and challenges
• Identified potential threats in the disbursement process and corresponding controls

Closing Remarks

• Encourage reflection on personal fears and dreams (quote from NPC)
• Reminder for student reflections and additional reading materials available in the Google Classroom

Note: This summary provides a high-level overview and reference for study purposes. More detailed information is available in the provided materials and textbooks.