Develop a bulleted list of 5-7 issues or best practices that you identified based on your reading of these articles and how it may impact you while performing in an accounting position.
The Entity's Information System 3.24 The key objective of an entity's information system is that it is capable of capturing and recording all the transactions accurately, settling them, valuing them, and producing information to enable the financial instruments to be risk managed and for controls to be monitored. Difficulties can arise in entities that engage in a high volume of financial instruments, in particular if a multiplicity of systems are poorly integrated and have manual interfaces without adequate controls. 3.25 Certain financial instruments may require a large number of accounting entries. As the sophistication or level of the financial instrument activities increases, it is necessary for the sophistication of the information system to also increase. Specific issues that can arise with respect to financial instruments include a. information systems, particularly for smaller entities, not having the capability or being appropriately configured to process financial instrument transactions, especially when the entity does not have any prior experience in dealing with financial instruments. This may result in an increased number of manual transactions that may further increase the risk of error. b. the potential diversity of systems required to process more complex transactions and the need for regular reconciliations between them, in particular when the systems are not interfaced or may be subject to manual intervention. c. the potential that more complex transactions, if they are only traded by a small number of individuals, may be valued or risk managed on spreadsheets rather than main processing systems and for the physical and logical password security around those spreadsheets to be more easily compromised. d. a lack of review of systems exception logs, external confirmations, and broker quotes, when available, to validate the entries generated by the systems. e. difficulties in controlling and evaluating the key inputs to systems for valuation of financial instruments, particularly when those systems are maintained by the group of traders known as the sales function or a third-party service provider, or the transactions in question are nonroutine or thinly traded. f. failure to evaluate the design and calibration of complex models used to process these transactions initially and on a periodic basis. g. the potential that management has not set up a library of models with controls around access, change, and maintenance of individual models in order to maintain a strong audit trail of the accredited versions of models and in order to prevent unauthorized access or amendments to those models. h. the disproportionate investment that may be required in risk management and control systems when an entity only undertakes a limited number of financial instrument transactions and the potential for misunderstanding of the output by management if the risk management and control systems are not used for these types of transactions. i. the potential requirement for third-party systems providers (for example, from a service organization) to record, process, account for, or risk manage appropriately financial instrument transactions and the need to reconcile appropriately and challenge the output from those providers. j. additional security and control considerations relevant to the use of an electronic network when an entity uses electronic commerce for financial instrument transactions. 3.26 Information systems relevant to financial reporting serve as an important source of information for the quantitative disclosures in the financial statements. However, entities may also develop and maintain nonfinancial systems used for internal reporting and to generate information included in qualitative disclosures (for example, regarding risks and uncertainties or sensitivity analyses)
