Analysis of Accounting Systems, IT Governance, and the UBS Case

This report begins with an analysis of traditional accounting systems, outlining their strengths and weaknesses, and then explores options for companies transitioning from such systems, specifically focusing on Smith Brothers. It evaluates accounting software packages like Xero and MYOB, comparing their features, costs, and suitability, while also considering the potential of Excel and spreadsheet-based solutions. The report then delves into IT governance, summarizing IT governance policies, discussing their relevance to shareholders and stakeholders, and examining their inclusion in corporate governance statements. A case study on UBS is included, focusing on the factors that led to the failure of controls. The report provides a thorough overview of accounting systems, IT governance, and real-world applications, offering valuable insights for business development.

COBIT®, UBS
BUACC5937 SEMESTER 1 2018
NAME: STUDENT ID:
NAME: STUDENT ID:

Student name – ID BUACC5937 SEM1 2018
Student name – ID Assignment 1
Contents
Page Number
1 Task 1 2
1.1 Traditional accounting systems
1.2 Options for Smith Brothers
1.3 Accounting software packages
1.4 Excel or Databases
2 Task 2 – COBIT®
2.1 Summarize the IT Governance Policy
2.2 IT Governance Policy to shareholders
2.3 IT Governance Policy to stakeholders
2.4 IT governance and the corporate governance statement
3 Task 3 – UBS
3.1 Failure of controls
3.2 Avoidance of Failures
4 References/Bibliography
5 Appendices
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1 Task 1
1.1 Explain traditional accounting system for recording transactions. 100
Identify its strengths and weaknesses 50 + 50
Discussion: In Traditional Accounting System, the paperwork, receipts and payments are sort and
store in 12 separate months. All the original documents are kept and dated correspondingly. The
traditional accounting system has payment amounts and date of transactions recorded. All the
financial transaction is saved online by monthly and the transaction of the financial year are saved
in the inbox that are kept in a separate folder of the hard drive. All the electronic records are kept
backup on a storage device and external hard drive rather than keeping in the internal hard drive of
the computer. Each month a financial record is reconcile requesting for a statement and bills that
need to be sent on monthly basis.
Strength: the strength of the traditional accounting system is discussing below:
 The expenses are less.
 With manual systems it is easier to make entries correctly.
 The risk of data getting corrupted is much less.
 The risk of losing data is less when records need to store in an environment that is fire-
proof.
 It generally avoids the problems that comes with similar records having duplicate copies.
 The manual process is simplified as it is not necessary to know about calculating in
accounting software for information.
 It includes flexibility and agility in redefining the business process, implementation of the
control point for collection of data.
Weakness:
 An inaccurate costing information is provided which lead to a wrong decision.
 It used to control the purpose of fixing the selling prices.
 Number of transactions are getting delayed.
 With the fast growing business it is becoming difficult to keep the pace of report keeping.
 Need to spend considerable amount of time in maintaining the books and journal
transaction.
 Payments are getting delayed.
 Unable to receive payment from customer by due date or either they do not make payment
even.
 Not possible to chase the overdue payment.
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1.2 What are various options that Smith Brothers have if they move from their current
system? 175
Discussion: If the Smith Brothers want to move from their current traditional accounting system,
then they can start with the computerized accounting system. This will make it easier to capture
information. It also meets the tax, generate the reports and some legal requirements. With the use of
accounting software system will simplify the electronic record keeping. It will help the Smith
Brothers to record the transaction made in the business which include the income and the expenses
done, payment done to the workers and get the details of the stocks and the assets. The storage
space is less required and the ways to keep the financial records are efficient. The system has an
option to record a sale for invoice but not for cash payment to receive. It easily generates the order,
invoices, payment records of the employee, debtor reports, and inventory reports. It provides some
functions of reporting and tallies the amount automatically. The system has the latest tax laws and
rulings, and tax rates. The Smith Brothers can provide email invoice to the customer, orders to the
suppliers or even returns BAS to the Taxation Office of Australian. It allows to keep the backup of
the records and is safe from fire or theft. The Smith Brother Business need more than one software
to meet the legal and taxation needs which is important. Thus, Smith Brothers has to take some
advice from the financial adviser before they make any software purchase for keeping their records.
They can also look into the Australian Taxation Official website to check through the accounting
software tax compliant.
1.3 Two accounting software packages 100
Explain how it will solve their current problem 100
Explain the strengths and any weaknesses 50 + 50
Explain the cost to purchase and implement 100
Discussion: The two type of accounting software packages that could be used are:
Xero: Xero has a massive market in Australia as it is an online based accounting software which has
achieve greater popularity in the country. It is basically created for the business users. The business
owner can use Xero for entering invoices and for statements reconcile. The information could be
easily and securely access by the accountant and prepare the BAS to annually return the tax. The
current problem of the Smith Brother could be reduce with the implementation of Xero. The
application has a dashboard panel where the information will be displayed with a list of invoices. It
has a center and front activity buttons that can create a new invoice, Bills payment can be done and
claims an expense. The strength of Xero is that it has fixed a robust accounting system that has a
barcode and a feature of RFID tracking. It even tracks the physical features. It has a core accounting
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solutions with wide range. The weakness of Xero is that it does not fully support the project and
find accounting. The time required to implement the software in the business would be depend on
the number of users and data that is needed to import. The user can implement itself without in need
of training the other users. Staff can be involve in the implementation process. Xero will be
introducing the feature of stock control into their packages. The monthly fee for it is at most $25. If
the user requires more feature than it may reach at least $50/month.
MYOB: MYOB is the cloud based online accounting software technology which has the feature to
control stock and the transactions of foreign exchange. Its security system is safer than other
system. The Smith Brother can opt for the MYOB accounting software as the application is
attractive and user-friendly. The dashboard is simple to understand for Money in and Money out.
For a non-accountant like Julia Ryan such sort of description would be more helpful. It easily
creates invoice, bill pays and more in a click. The application is also touchscreen friendly. The
Essentials of MYOB stored documents that are scanned. The strength of MYOB is that the tax
feature is inbuilt which could compute at once and provide an invoice and billing system. The
weakness of MYOB is that it does not fully support project and fund accounting and assets that are
fixed. The essentials of MYOB are purely online whose cost of accounting is $29/month and
cashbook is $16/month. The basic of MYOB is $30/month, the standard version of MYOB is
$43/month and the Plus version of MYOB is $80/month. Large business can use MYOB premium
for inventory management and foreign exchange capabilities.
1.4 Explain if excel or any other spreadsheet or database based solutions can also be
implemented?
If yes then why and how, if no then explain. 175
Discussion: Yes, excel can be used for basic accounting. With excel the user could keep tracking the
business. However, it is not possible for complicated financial accounting. If the business is
working on a tight budget, then it can make an attempt of decent accounting in Excel. If the
business is set using the Excel for bookkeeping, then Julia Ryan would generate incredible reports
for the accounting data. She could easily do day-to-day comparisons between months that can give
anomalies in expenses. The recurring cost could be strip out which gives a clear picture where the
cash is going. She could divide the customers into groups which would be completely based on
their purchase, location or size. Later the groups would be compare to spend most in the business.
Another solution can be taken is the Spreadsheet as it has lot of functionalities which lets the
bookkeeper to do her most of the work on the spreadsheets. The bookkeeper could be able to review
financial, sales or bank data from the tool of third party. Julia could easily maintain the books and
journal transactions by keeping the details through the spreadsheet. Timely payment by the
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customer will be easier with any delay in the payment would be receive by due date.
2 Task 2 – COBIT®
2.1 Summaries the IT Governance Policy 175
Discussion: The policy of IT Governance is consistent with its principles. It has published some
recommendations that were made available publicly on the website. The Board has decided to bring
some changes to the IT Government Policies and Recommendations. The executive and the board
of director are responsible for the IT governance. It consists of the structure of the organization,
leadership and the process of enterprise’s IT sustains that extends the strategies and objectives of
the originations. The IT governance has a good practices of enterprise IT support of the business
objectives which enables them to take the full advantage of the information. These maximize the
benefits, gain competitive advantage and capitalizing the opportunities. Control Objectives for
Information and related Technology (COBIT) has a good practice and a process framework that
presents the activities in a logical and manageable structure. COBIT strongly focus on the control
rather than in execution. The control framework of COBIT thus contributes the need of making
business requirement link, organizing the process model of the IT activities, leveraging the
identified IT resources, and consider the objectives of the management control.
2.2 Why do you think that the IT governance policy is not of interest to shareholders? 175
Discussion: To justify the reason of the shareholder not interacted in the IT governance policy is
that it gives pressures to the shareholder regarding the protection of the confidential information,
disaster recovery and the data retention and financial accountability of the organization. Most of the
organization are in control of the shareholders that allows then to maintain the equity. Shareholder
monitors the company and its management.
2.3 Why do you think that the IT governance policy is not of interest to other
stakeholders? 175
Discussion: The domestic investors increase their focus and engagement on the activities of
government and corporate. The case is similar to the above statement. Even other shareholder is not
interested in the IT governance policy for the protection of the confidential information, disaster
recovery and the data retention and financial accountability of the organization. Other shareholders
have concern about their status and implementation that are important for the role of improving the
arrangements of the corporate governance.
2.4 Should the IT governance policy be in the corporate governance statement? 175
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Discussion: Yes, definitely IT governance policy provide a framework and a structure for the
organization and it even ensure that the business objectives would be supported by the IT
investment. The practice of corporate and IT government across the Australian organization has
enactment with the laws and regulations that results is fallout from deception cases and the
corporate fraud. With IT governance, a structure could be provided that could align the IT strategy
with the strategy of the business. Measureable results could be produce with the framework of the
organization. The needs of the industry comply with the regulations of the technological and
financial accountability. Even a very small entity practices essential methods of IT governance.
3 Task 3 - UBS
3.1 What factors led to the failure of controls?
Discussion: UBS was allegedly hit by trading incident and the internal controls failed. The
investment bank posted unauthorized trading lose. It has a drop in the revenues. The analyst mainly
focuses on the ratio of compensation for the staff. In the previous year the management defended
the deferral of bonuses. In overall, the variable compensation set by the bank with SFr775m in third
quarter, later being compare with the second quarter for SFr867m and the prior bonus deals was
related to SFr467m. The finance director also admitted that some of the staff had to pay back some
part of their bonuses. Since the bank was suspected to rogue trader, multiple staff had given
resignations. Due to false accounting and fraud of four counts Kweku Adoboli was charged and
arrested. Despite of the investment bank lose; the bank was intense to pay the bonuses. UBS admit
that their internal controls were not so effective. There were two control deficiencies. The first is the
confirmation require to control the trade counterparties within the equities business of the
investment bank. The second is the controls for the relationship of different trading desks that are
within the fixed income and the equities of the investment banks, commodities and currencies
businesses that ensures the internal transactions which are recorded accurately in the records and
books of UBS’s.
3.2 Could the failure have been avoided? If so, how?
Discussion: Yes, definitely the failure could be avoided by taking some additional remedial
measures that can prevent the loss of the investment bank. Strengthening the internal controls
measure the effectiveness. The controls need to be properly designed and implemented to work
effectively. Recommendations need to be made to improve the internal control. Even improving the
communication process can strength the internal controls. There are major events occurring within
the business units. This can lead to problem as there would be no opportunity to manage and fix
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something that are unaware and is broken.
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4 References/Bibliography
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(ASA): Fifteen Top Financial Ratios to Evaluate Jordanian Banks' Performance. Journal of
Applied Finance and Banking, 7(1), 119.
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Davis, J. T., Ramamoorti, S., & Krull Jr, G. W. (2017). Understanding, Evaluating, and Monitoring
Internal Control Systems: A Case and Spreadsheet Based Pedagogical Approach. AIS
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Eman, A. H., & Nassar, M. (2017). The Factors Affecting the Different Management Accounting
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Kornberger, M., Pflueger, D., & Mouritsen, J. (2017). Evaluative infrastructures: Accounting for
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Machera, R. P., & Machera, P. C. (2017). Computerised Accounting Software; A Curriculum That
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Mangiuc, D. (2017). Accountants and the cloud–Involving the professionals. Accounting and
Management Information Systems, 16(1), 179-198.
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Rekarti, E., & Doktoralina, C. M. (2017). Improving Business Performance: A Proposed Model for
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Sallem, N. R. M., Nasir, N. E. M., Nori, W. M. N. W. M., & Kassim, C. K. H. C. K. (2017). Small
and medium enterprises: Critical problems and possible solutions. International Business
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Siregar, S., & Rustamaji, E. (2017, August). Determining evaluated domain process through
problem identification using COBIT 5 framework. In Cyber and IT Service Management
(CITSM), 2017 5th International Conference on(pp. 1-6). IEEE.
Turner, M. J., Way, S. A., Hodari, D., & Witteman, W. (2017). Hotel property performance: The role
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Wijethilake, C., Munir, R., & Appuhami, R. (2017). Strategic responses to institutional pressures for
sustainability: The role of management control systems. Accounting, Auditing &
Accountability Journal, 30(8), 1677-1710.
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5 Appendices
Appendix 1:
The figure is the COBIT content diagram represents the applicable products with the primary
audience. Also there are purposes that are specific for derive products and for enterprises.
Appendix 1:
The figure above is the Possible Maturity Level of IT process that illustrate the process largely at
level 3 and compliance issues in performance measurement (level 4) and the optimization (level 5).
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Appendix 3:
The figure above show the overall COBIT framework whose elements map to IT governance
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