Accounting Systems & Controls Flashcards
6 cards from real AAT L4 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Accounting Systems & Controls flashcards as text
An accounting system is effective when it:
Answer: Processes transactions accurately and completely, providing reliable financial information for decision making and control
An effective accounting system ensures transactions are captured accurately, completely, and in a timely manner, with appropriate controls to prevent errors and fraud — providing reliable information for management decisions and financial reporting.
Segregation of duties as an internal control means:
Answer: No single individual has control over all stages of a transaction, reducing the risk of fraud or error
Segregation of duties ensures that different people handle different stages of a transaction (e.g., authorising, recording, custodying assets) so that errors or fraud require collusion, which is harder to conceal.
Which of the following is an example of a preventive control?
Answer: Requiring authorisation before a purchase order is raised
Preventive controls stop errors or fraud before they occur — for example, requiring authorisation before a purchase is placed. Detective controls (like reconciliations and reviews) identify errors after they have happened.
The audit trail in an accounting system enables:
Answer: Tracing any transaction from its source document through to the final accounting records and vice versa
An audit trail provides a sequential record of every transaction and system change, enabling transactions to be traced from source documents (invoices, receipts) through journals and ledgers to the financial statements.
A key risk associated with cloud-based accounting systems is:
Answer: Dependence on internet connectivity and reliance on the provider's security measures to protect data
Cloud systems rely on continuous internet access and on the service provider's security, backup, and recovery procedures; risks include data breaches, provider failure, and connectivity issues.
The purchase order authorisation control ensures:
Answer: Only authorised staff can commit the business to spending through a formal approval before ordering
Purchase order authorisation requires a responsible manager to approve the order before it is placed, ensuring the business only commits to expenditure that has been properly sanctioned and budgeted.