Q.1 a) There are various processing methods in terms of accounting. Processing method refers to the system through a data related to accounting or any other field is gathered in order to generate meaningful analysis and results from that data.

The two most important processing methods are batch processing and online real time processing. The basic difference between the two methods is that of time frequency with which the data is entered in to the system for information purposes. Under batch processing the data is assembled in batches, and then it is entered into system for processing. E.g. a company may like to record its inventory at the end of every month. So instead of taking inventory and processing it into system daily, the inventory is recorded every day and at the end of the month, the entire “batch” of inventory is recorded in the system for processing.

While in the online real time processing the transaction is processed or entered in to the system as soon as the transaction is done. The best example of online real time processing is the ATM Card or Debit Card. As soon as a transaction takes place on the ATM, it is recorded and is processed right on the spot. Thus in online real time processing the actual balance perfectly reflects the current position.

Q.1 b) The grandfather-father-son technique refers to the data backup technique. In grandfather-father-son technique the data backup is maintained in such a way that if the most recent data backup is lost then the lost data can be recovered by the previous backup of the data. In grandfather-father-son technique three stages or generations of data backup is maintained. For example, the data for fixtures is maintained for three years. Today’s data (son) will become next year’s data backup (father) and till third year it will remain the part of data backup (grandfather). In this way three levels of data backup are maintained. This is done in order to reduce the incessant data build up and to only keep the meaningful in hand for useful analysis.

The grandfather-father-son technique of data backup can be applied in payroll application by maintaining the data backup of payroll for three consecutive years. By having data for three years some meaningful analysis can be gained. Firstly, it will help in analyzing the trend of payroll, whether it has increased or decreased over the years. Moreover, it will help in preparing forecast budgets for the next year. By maintaining data for three generations of payroll the effects of inflation can be analyzed succinctly.

Q.1 c) A service bureau environment is very sensitive to customer care. A little mismanagement can create tremendous trouble for the service bureau environment. Moreover, as the service bureau environment is an integral part of the financial world therefore maintaining its credibility in business realms is of utmost importance. A service bureau environment also entails hi-tech environment where technology plays a crucial role. Moreover, in order to ensure high quality of services service bureau environment has to work seriously on internal controls. In service bureau environment that kind internal controls should be installed which not only ensure credibility of manual work, rather the technological aspect of the service bureau environment should also be constantly checked in order to maintain its credibility and functionality.
Assessment Task 2 a) Various weaknesses in internal controls in terms of administrative controls a are outlines as follows: i. The door in to the IT operations area was unlocked. This is a serious breach of administrative controls. A service bureau environment relies greatly on the information technology. If IT department is freely accessible to anyone (as the door is unlocked) then this could result into creating potential danger. As rivals could plot to destroy the IT department or some other accident may occur because of that. ii. The lack of organization shortage is another problem in administrative controls as the employees will remain unclear regarding their authorities. iii. The IT operations department and general accounting office was not properly divided. This could create disturbance in both the departments. Moreover, for proper auditing requirements, accounting office should be properly separated from other departments for the purpose of confidentiality. Moreover, IT operations is very crucial as the whole of service bureau environment depends on its efficient functionality. b) Various weaknesses in CIS controls are briefly outlined as follows: i. No data backup for transaction files is maintained. In this case, the company is highly dependent on master files for backup. ii. The changes to the inventory management are being done in urgency. Before directly implementing the changes, test runs should be done.
The weaknesses could be mitigated by properly implementing the segregation in different departments. Everything should be cross checked and high quality equipments should be used, with their substitutes, to avoid technological failure.