Professional Documents
Culture Documents
Appendix D
Financial Information Systems
D-1
Internal users
Managers
Nonmanagers
Environmental users
Those with direct business relationships
Those with no direct relationships
D-2
D-3
Input
subsystems
Data Information
Forecasting
subsystem
Accounting
information
system
Internal sources
Internal
audit
subsystem
Environmental
sources
Financial
intelligence
subsystem
Database
Funds
management
subsystem
Users
Control
subsystem
D-4
D-5
D-6
Internal
Audit committee
Probably includes the CFO
Director of internal auditing
External auditors
Importance of objectivity
D-7
Board of Directors
Audit Committee
Position of
Internal Auditing
in a Firm
Chief
Executive
Officer
Director of
Internal
Auditing
Internal
Auditing
Department
D-8
Adequacy of controls
Efficiency
Compliance with company policy
Concurrent auditing
Internal control systems design
D-9
D-10
Relative Cost of
Fixing a Defect
4000%
Implementation
1200%
Integrated testing
500%
Module testing
100%
40%
10%
Development
Conceptualization
Design
Requirements
1%
D-11
Annual meetings
Annual reports
Quarterly reports
D-12
Financial Intelligence
Subsystem [cont.]
Word of mouth
Periodicals
Computer databases
Forecasting Subsystem
One of the oldest mathematical activities in business
Rely on past data
Make semistructured decisions
Cannot be perfect
Short-term forecasts
One to three years
May be done by marketing
Long-term forecasts
Usually done by finance, or special planning group
D-14
Forecasting Methods
Nonquantitative (qualitative)
Panel consensus
Delphi method
D-15
D-17
es
r
g
Re .
3
2
1
0
n
o
i
s
lin
Sales prediction
.
.
.
5
10
15
20
25
Number of salespersons
30
35
D-18
D-19
Sales
(Y)
24
27
31
29
33
38
37
40
45
49
Advertising
(X2)
4
4
5
5
6
7
8
8
9
10
Price Ratio
(X3)
80
80
90
100
100
110
120
100
90
100
D-20
Manage to achieve
D-21
Dollars (millions)
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Jan
Sales
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Manufacturing expenses
expenses
Dec
D-22
1.2
1.1
Dollars (millions)
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Months
Sales
Manufacturing expenses
Control Subsystem
Operating budget for the fiscal year
Three approaches
1. Top-down
2. Bottom-up
3. Participative
D-24
1.
Forecasting model
Sales forecast
2.
Top
management
The Budgeting
Process
Approved sales
forecast
3.
Finance
requirements
4.
Finance
manager
Requested
finance
budget
Resource planning
model
Human
resource
manager
Information
services
manager
Requested
information
services budget
Requested
human
resources
budget
5.
Manufacturing
requirements
Manufacturing
manager
Requested
manufacturing
budget
Marketing
requirements
Marketing
manager
Requested
marketing
budget
Top
management
Final organizational
budget
D-25
BUDGET
ACTUAL
SALARIES
TRAVEL
ENTERTAINMENT
TELEPHONE
RENT
FURNITURE
SUPPLIES
MISC.
$23,500
8,250
1,400
200
535
0
625
400
$22,000
9,000
1,635
85
535
0
410
620
TOTAL
$34,910
$34,285
DOLLARS
$1,500750+
235+
115+
0
0
215220+
625-
YEAR-TO-DATE
BUDGET
ACTUAL
DOLLARS
$59,000
23,500
4,200
600
1,605
420
1,875
1,200
$54,250
28,100
5,100
225
1,605
505
1,320
1,963
$4,7504,600+
900+
375+
0
85+
555765+
$92,400
$93,070
670+
D-26
Performance Ratios
current assets
Current ratio =
current liabilities
cost of goods s
Inventory turnover ratio =
average inventory
D-27
Forecasting
X
X
X
Funds
Management
X
X
X
X
X
X
X
X
X
D-28
Summary
Auditing
Financial intelligence
Forecasting
Funds management
Budgeting
D-29