Information System, Including the RelateInformation System, Including the Related Business Processes, Relevant to Financial Reporting, and Communication

Information System, Including the Related Business Processes, Relevant to Financial Reporting, and Communication

1. An information system consists of infrastructure (physical and hardware components), software, people, procedures, and data. Many information systems make extensive use of information technology (IT).
2. The information system relevant to financial reporting objectives, which includes the financial reporting system, encompasses methods and records that:

• Identify and record all valid transactions.
• Describe on a timely basis the transactions in sufficient detail to permit proper classification of transactions for financial reporting.
• Measure the value of transactions in a manner that permits recording their proper monetary value in the financial report.
• Determine the time period in which transactions occurred to permit recording of transactions in the proper accounting period.
• Present properly the transactions and related disclosures in the financial report.

1. The quality of system‑generated information affects management’s ability to make appropriate decisions in managing and controlling the entity’s activities and to prepare reliable financial reports.
2. Communication, which involves providing an understanding of individual roles and responsibilities pertaining to internal control over financial reporting, may take such forms as policy manuals, accounting and financial reporting manuals, and memoranda. Communication also can be made electronically, orally, and through the actions of management.