 Hello and welcome to the session in which we will discuss input controls. Input controls is a form of a preventive control. Now what is a preventive control? Preventive control is trying to deal with the issue before it happens. You're trying to eliminate the error before it infects your system. So eliminate any mistakes, error, garbage, right from the source. Don't let those mistakes, errors infect your system. This is what I mean by preventive. Don't let it happen in the first place. Now you can use human, basically people, to prevent errors or you can automate the system. Now every time you can automate the system, especially for routine transaction, it should be done. So human intervention, the reason we call it input control because if a human is inputting the information into the system, think about the old days, they will input everything by typing. This is what we mean by input control, making sure input control, making sure the human does not make mistakes. Well, as technology progresses, we were able to automate many of those input controls. Sometimes they're called program control, edit checks, and in other terms for them is origination controls. Simply put, when we say origination control, that means right from the origin, the computer is taking care of the controls versus input control, the source of a human intervention. Don't get hung on the term just in case you saw it. I'm just gonna call it input controls. Now why people are not as good as computers? Well, people can make a judgment, but when it comes to making errors, people get tired sometime. Computers don't get tired. Programs don't get tired once they are programmed properly. People are lazy, they get lazy sometime. They don't do what they're supposed to do. They lose motivation. They might be having a bad day. For all these reasons, automated controls, if you can find a way for the system, for the IT system to prevent errors from happening, you would let the system do it. So technically, we are relying on a computer system to have input control. Before we proceed any further, I have a public announcement about my company, farhatlectures.com. Farhat accounting lectures is a supplemental educational tool that's gonna help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Myles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions, as well as exercises. Go ahead, start your free trial today. No obligation, no credit card required. So what are the objective of that? Well, we want to make sure that the transaction that we process are authorized. So validity is important. So one of the objective of the input control it promote validity. For example, you won't be able to input a ghost customers and we're gonna see specifically, we're gonna, I'm gonna discuss 12 specific controls that's gonna achieve those objective. Validity is one, input control promote validity. It promote completeness or achieve completeness. You might want to have an input control where you wanna make sure you're capturing the transaction details, everything. You're not missing any information. So another objective of input is to achieve completeness. So the transaction is valid. It's not only valid, you captured everything. Three, you wanna make sure the data is accurate. So a third objective of input controls is to have accuracy, help you only enter the correct data. And notice these are the V's, the C's and the A's. So when I discuss the input control I would have next to the input control. What does it mainly focus on? Is it validity? Is it completeness? What does it promote accuracy? So on and so forth. And the fourth objective of input control is promote efficiency. Computers work faster. They don't get tired. They work 24-7 a day. They don't need breaks. So you spend less time and resources to accomplish your goal if you could automate the system. So and that's the fourth objective of input control is efficiency. For example, a scanner. Think about if you're standing in line somewhere and this happens to me all the time when I buying a cup of coffee from Wawa or in a retail store where the scanner cannot read the numbers because the box is damaged. Then what happened? The person that's the teller will have to input the code. And sometimes like 15, 16, 18, 20 digits and sometimes they make mistakes. It takes time to process the transaction versus a scanner. You scan the item and the sale is recorded. So also input control basically scanning is part of it. It's capturing the information, capturing what item we are selling. It promote efficiency. Now specifically I'm gonna be looking at 12 input controls. What do you have to do as a CPA candidate? Well, one thing is you have to understand them. I think they are common to a great degree if you understand them they're common sense but you also you have to memorize and you have to know how to apply given a risk how would this control address that risk? Starting with missing data check or completeness check. This is an input control. If I'm sure this happens with you as well. Sometime you are filling a form online and you try to submit and after you submit it says you did not complete this form. What happened is the form is programmed that it doesn't submit. It doesn't complete the transaction until you input all the necessary information. So this will promote completeness and accuracy. Now another similar input control to this is promoting input check. And I'm pretty sure sometime what happens is you are filling out a form. It gives you only one box at a time or one question to answer. You cannot proceed until to the next field until you completed the previous question. Also this promote completeness and accuracy. Simply put, you cannot submit the information. Actually you cannot complete it to submit it unless you answered all the questions. So these two promote basically completeness. Three, we have something called field check or edit check. So the data must be acceptable. So you program the field and people who are familiar with database are familiar with this. Would it only accept certain type of data? For example, if it's a name, it should only accept letters. Now we could have a person with numbers in their name. I'm not sure. Okay, but it should only accept letters. For example, if it's a zip code, it should accept numbers. If it's a date format, it should have the date. They have to be, for example, June 3rd is 0603 2005. Length and format. And it verified the length and the format. Here you wanna make sure that the data is valid and accurate. Also, you have to understand that also, for example, if you have social security, you want to use numbers. For example, under social security, you only accept numbers. For example, under a state, you would only accept two letters. And we're gonna talk about where this, you don't even, you cannot even put any two letters you want. And we're gonna talk about how you control which two letters. Also for the zip code, yes, it is five digit, but those five digit has to be valid. And I'm gonna show you soon what control do we have to make sure those two, for example, are valid to illustrate this. You could also have a limit test, okay? For example, the field does not exceed a specified value, otherwise it's rejected. For example, the zip code. Now, some zip codes, you know, we could have up to nine, but most people use five. For example, there's only five digit. You can only have five digits. You cannot have four digit zip code. You cannot have six digit zip code. So you specify how many, so you'll tell it, I want to have a numeric value in this and only five numeric value. In addition to the five numeric value, those numeric value has to be valid and we'll talk about that later. Same thing with state name, okay? So also you can have a limit test. Also you could have a limit test in terms of, for example, if you don't want your employees to work overtime, your system would not accept more than 40 hours per week. So if you try, let's assume someone wants to add some hours, overtime hours, they can't, the system itself don't allow you to do it. Now you might have to overcome the system. Maybe you have to get the manager to override it. That's a different story, but the system itself, it has a limit test. So this is a limit test where it limits you. For example, any check or refund should not exceed $500. That's a limit test. You just don't let the system do it. It just, it stopped you from doing it. For example, date of birth for minors. Once a minor input their date of birth, if in the date format, it will trigger that this individual cannot be, we cannot hire this individual because they are minor. It rejects the application upfront. So those are examples of limit test. And there's many, many applications to the limit test. There's also a range test. For example, you can program the input basically to accept a minimum and a maximum or something in between. For example, order quantity has to be at least one, but you cannot order more than 10 of any particular item. Maybe we have a shortage of it. Therefore, we don't want them to order more than 10 items at a time. So you would have a range test to make sure, to make sure no one over-order basically. Or hours work. For example, if you have part-time employees, you want every employee to work at least five hours and cannot exceed 30 hours. Therefore, in the system, when they input the hours, again, assuming it's controlled with a timesheet, it has to be at least five and does not exceed 30. Think of a trading platform at a major brokerage house. Let's assume a stock is trading at $100. For example, they can program it where somebody inputting the order cannot have more than 5% higher or 5% lower. So simply put, a trader cannot make a mistake and put, for example, a $1,000 trade, which is the whole market will go bazook. It happened before. But the point is you could have a range where you cannot bid the price more than 5% of its most current price. So this is what a range test, range test is. Sign test, basically, whether you want to tell the system whether to accept negative numbers or no negative numbers. So if somebody input a negative number, it will be rejected. For example, for a refund, it might be accepted. Also, we have an integrity or validity test. And this is what I was talking about earlier when we talk about a zip code or a state. Okay, so you want, for a zip code, you want it to be numeric and you want it to be five. Now also, could you put any five zip codes? Not at all. What you will do, data input is cross-reference to a database. So you'll have a database. You can buy a database from somewhere else. For example, from the United States Postal Service, the zip codes in the US. And what you do when the individual is inputting the zip code, 19380, automatically this zip code is checked against the database. If that zip code agree in making sure it's agree with the state, for example, state of Pennsylvania, then the zip code is accepted. So whatever a customer, whatever an individual tried to input the data, that data, often time, is cross-referenced against a primary key. Now the zip code is an easy example to kind of work with but also, if someone is adding a customer, you cannot add a customer, for example, unless that customer is already in the database. Now hold on a second. So who put that customer in the database? We're gonna have other controls about that customer we'll talk about later. So let's assume you want to add a customer and you put their number one, five, six, seven, eight. Just make up some number. If that number don't already exist in the database, this new customer will have through some type of a control system to be in the system. Same thing for vendor ID, same thing for employees. So when you input the information, it's cross-referenced with something else. Otherwise, the entry is not acceptable. It will be rejected. This is called integrity test or validity test. And this is very important because it promotes validity, accuracy, completeness and efficiency. So you don't have to kind of figure out the zip code once you type it in. It's gonna verify it, make sure it's correct. Also what you can have is check digit. And all these controls are interrelated. So check digit is somehow interrelated to integrity test. Credit card uses those, a lot not uses those, always uses those. Basically it's a secret formula to ensure the account number is correct. How so? Remember this customer here when I try to input that customer number. For example, the company might have some sort of a secret formula. So when you create a customer, you create a unique customer number. And that number could be, I'm just gonna make up some numbers, four, seven, six, four, two. Now that number does not mean anything to you. It does not mean anything to me. So I'm gonna figure it out now, what I just did. So let's see. Four plus seven plus six plus four plus two. Let me add all these numbers up. Just I'm making something up. Four plus seven plus six plus four plus two. If my math is right is 23. Okay? Now I might have a secret formula that all my account numbers has to add up to 23. Okay? So, you know, but no one would know this formula. I'm just saying it could be. Now let's make it 24. Let's make plus three. Okay, make it 24. Or I would say once I will have a four. The numbers for a customer should equal to 24. And you divide 24 divided by two equal to 12 plus five equal to 17. So the formula will have to, when we add all the digits, divide them by two, add five, it should equal to 17. So something like that. So the system would verify that this is a legitimate new customer. So not anyone can add a customer. And once that customer is established in the database, then when I go to sell this customer, I have an integrity test and I'm assured. Now, you know, companies don't tell their employees, maybe the programmers know about these, like especially credit card company, the way that number, that number means something. There's a formula in there. You add up all the numbers, divide them by five, multiply them by six, minus one, should equal to a number. You don't know what it is. Otherwise you could make up any number and send the number and who knows, maybe it will work, right? But that's not how it works. This is called a check digit. You could also have a reasonable check or logic test within the form or within the input process. Check to see if data in two or more field is consistent. For example, you can compare the date of birth and the age. You can ask the applicant to put their age and to put their date of birth and the computer can figure out what should be the age and if there's any discrepancy, it will prompt you. Or if it's a salaried employee, if it's salaried employee, they should not have any hourly rate data. Key verification. And here we should be all familiar with key verification. It's when you type the password twice or when you type your email twice, why to make sure? And believe me, this happens all the time. Even my company, like Farhat Lectures, you only input your account number once. You input your email once. And you guys have no clue how many times I get emails. Well, I'm using my email and it's not working. Well, what happened is my software don't have the key verification process. They don't ask you to put your email twice. They ask you to put it once. So if you chose an email, let's assume your email is Farhat667 667, and you input it as Farhat6677. Well, you're gonna register, but you have the wrong email. When you try to log in with Farhat667, it's not gonna work. And you're gonna email me, so why it's not working? Now I know immediately that when you input your email, there's something correct. I'll go in, I would look up the customer, I would say, this is the email that you use 677. Log in with it, then go back and change it. But this is what key verification is. Basically, you wanna make sure, because that's gonna save you time up front. Close loop verification, basically after you complete all the data, after you input all the data, it will present the data, it will present all your answers before you submit. And I use this when I submit grades for my students. We have a closed loop verification. I input all the grades, I submit. It shows me like I submit the first time to kind of review everything, like every individual with their grade. And if I agree to it one more time, I'll click on submit this way. If there's a mistake, I can go back and change it. This is called closed loop verification. Another input measurement is pre-formatted or pre-filled form. Simply put, make the form, the electronic form as similar as possible to a physical form. If it's a physical form exists and pre-fill it with certain items. For example, the date of the transaction. So as soon as the individual opened the application to start the sales transaction, that information is already entered. So we know exactly what date it took place. The name of the individual, the name of the person that's working on this transaction, import it there. If we need the time, their IDs, if the term of the sale for this customer is acceptable, well, we should automatically, so once they select the customer, maybe the customer have certain terms of sale that should also populate it. So all these are what are they called input control? And the reason for this is to make sure that right from the beginning we are inputting correct information into our accounting information system, into our software. Because remember, garbage in is garbage out. Try to avoid the garbage right from the get go. So this way you avoid mistakes and processing and output, which we'll talk about in the next session. What should you do now? Go to far hat lectures. Look at additional resources, MCQs, multiple choice. That's gonna help you understand this important topic that's tested on the CPA exam and in your accounting information system or data analytics. Good luck, study hard, accounting is worth it. Stay safe.