ACCT 513 Accounting for Information Systems

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Workshop 4 – Problem Document

Instructions:

1. The following pages have answer areas for the chapter problems from the chapters for this workshop.
2. Locate the problems in your textbook.
3. Your instructor will evaluate your submitted work and determine the points you will earn for this activity.
4. For all written responses use complete sentences, APA, proper grammar and cite sources when appropriate.

• Theft of goods by the shipping dock workers, who claim that the inventory shortages reflect errors in the inventory records.

• Posting the sales amount to the wrong customer account because a customer account number was incorrectly keyed into the system.

Using closed loop verification could help with this problem. For example, when the employee enters the account number the system could retrieve and display the account name so the employee can verify the correct account number had been entered (Romney & Steinbart, 2015). Additionally, including a portion of the company name with the account number for each client can help with batch posting because the system can verify the name matches after finding a match for the customer number prior to posting the sale. It is important to note that a validity check would not work for this specific problem because the account number entered exists; it just belongs to a different customer.

• Making a credit sale to a customer who is already four months behind in making payments on his account.

Careful monitoring of accounts receivable with up-to-date credit records would help with this problem. Having a current account receivable aging schedule will help identify which customers are current and which have fallen behind on payments and should not be allowed to purchase merchandise on credit. In addition, the company could program the system to flag a credit sale to a customer with a past due balance over a specific number of days.

• Authorizing a credit memo for a sales return when the goods were never actually returned.

• Writing off a customer’s accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer.

• Billing customers for the quantity ordered when the quantity shipped was actually less due to back ordering of some items.

• Theft of checks by the mailroom clerk, who then endorsed the checks for deposit into the clerk’s personal bank account.

• Theft of funds by the cashier, who cashed several checks from customers.

One way to prevent this issue is to have the mailroom create a cash prelist, send checks to the cashier and a copy of the cash prelist to a 3^rd party. The cashier prepares a deposit slip for the checks-one goes to the bank with the check and one is sent to the 3^rd party. The bank deposits the checks and send a validated deposit slip to the 3^rd party. The 3^rd party then compares the cash prelist, deposit slip, and validated deposit slip to be certain the cash received is the amount deposited.

ACCT 513 Accounting for Information Systems

• Theft of cash by a waiter who destroyed the customer sales ticket for customers who paid cash.

• Shipping goods to a customer but then failing to bill that customer.

• Lost sales because of stockouts of several products for which the computer records indicated there was adequate quantity on hand.

To prevent this issue, the company should do a regular physical inventories and compare them to the computer inventory records. In addition, incorporating sales forecasts can help a company better predict inventory needs and reduce the risk of stockouts (Romney & Steinbart, 215).

• Unauthorized disclosure of buying habits of several well-known customers.

Encrypting the data, restricting access by using authentication controls like passwords, and training employees on the importance of information privacy and confidentiality should help prevent this issue.

• Loss of all information about amounts owed by customers in New York City because the master database for that office was destroyed in a fire.

• The company’s Web site was unavailable for seven hours because of a power outage.

• Interception and theft of customers’ credit card numbers while being sent to the company’s Web site.

• A sales clerk sold a $7,000 wide-screen TV to a friend and altered the price to $700.

• A shipping clerk who was quitting to start a competing business copied the names of the company’s 500 largest customers and offered them lower prices and better terms if they purchased the same product from the clerk’s new company.

To prevent this issue, the shipping clerk should be restricted from accessing the customer list. In addition, a log analysis would provide an audit trail of system access or attempted access.

• A fire in the office next door damaged the company’s servers and all optical and magnetic media in the server room. The company immediately implemented its disaster recovery procedures and shifted to a backup center several miles away. The company had made full daily backups of all files and stored a copy at the backup center. However, none of the backup copies were readable.

In order to prevent this issue the company should occasionally check to verify that the backups are readable and that they are capable of restoring the optical and media information.

The clerks take turns preparing and mailing monthly statements to patients with unpaid balances. One of the clerks writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates that belief to the office manager. The office manager then issues a credit memo to write off the account, which the clerk processes.

The office manager supervises the clerks, issues write-off memos, schedules appointments for the doctors, makes bank deposits, reconciles bank statements, and performs general correspondence duties.

• Identify at least three control weaknesses at Parktown. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them.

• Weakness: The employees who perform services are permitted to approve credit without an external credit check.

Control: Perform an external credit check to establish credit limits. This should be done by someone other than the doctor providing the service.

Weakness: The physician who approves credit also approves the write-off of uncollectible accounts.

Control: Segregation of duties where one person handles the cash receipt, one handles the billing, and still another maintains accounts receivable.

Weakness: The employee who makes bank deposits also reconciles bank statements.

Control: Segregation of duties where one employee makes the deposit and another issues credit memos.

Weakness: Trial balances of the accounts receivable subsidiary ledger are not prepared independently of, or verified and reconciled to, the accounts receivable control account in the general ledger.

Receiving The receiving department gets a copy of each purchase order. When equipment is received, that copy of the purchase order is stamped with the date and, if applicable, any differences between the quantity ordered and the quantity received are noted in red ink. The receiving clerk then forwards the stamped purchase order and equipment to the requisitioning department head and verbally notifies the purchasing department that the goods were received.

Accounts Payable Upon receipt of a purchase order, the accounts payable clerk files it in the open purchase order file. When a vendor invoice is received, it is matched with the applicable purchase order, and a payable is created by debiting the requisitioning department’s equipment account. Unpaid invoices are filed by due date. On the due date, a check is prepared and forwarded to the treasurer for signature. The invoice and purchase order are then filed by purchase order number in the paid invoice file.

• Describe the weaknesses relating to purchases and payments of “special orders” by the Diamond Manufacturing Company.
• Recommend control procedures that must be added to overcome weaknesses identified in part a.
• Describe how the control procedures you recommended in part b should be modified if Diamond reengineered its expenditure cycle activities to make maximum use of current IT (e.g., EDI, EFT, bar-code scanning, and electronic forms in place of paper documents).

• A production order was initiated for a product that was already overstocked in the company’s warehouse.

• Current and accurate data on customer orders/sales
• Current and accurate sales forecasts
• Inventory levels of finished goods
• Inventory level of goods under production

Maintain accurate _perpetual_____ inventory records.

• A production employee stole items of work-in-process inventory.

• Document all internal movements of inventory (move tickets)
• Physical counts of inventory and reconciliation of those counts to recorded inventory
• Proper supervision by production supervisors
• Have employees sign on the amount released and the amount received for work in process transfers

• The “rush-order” tag on a partially completed production job became detached from the materials and lost, resulting in a costly delay.

• Rush order information included on production schedule
• Status reports from the ERP system to compare production against production schedule to detect problems with timely completion
• Mark materials with rush-order tags
• Monitor progress on rush orders

• A production employee entered a materials requisition form into the system in order to steal $300 worth of parts from the raw materials storeroom.

• Restrict authorization of materials rquistions to department supervisors
• Require signature of production employee for receipt of materials
• Examine differences between expected materials usage and actual usage for work in process

• A production worker entering job-time data on an online terminal mistakenly entered 3,000 instead of 300 in the “quantity-completed” field.

• Incorporate a limit check to validate the quantity entered against a fixed value like time scheduled or expected for the job
• Incorporate programming so that if the data entered is not acceptable it prompts the worker to re-enter until it is
• A production worker entering job-time data on an online terminal mistakenly posted the completion of operation 562 to production order 7569 instead of production order 7596.

• Have workers assigned to specific jobs and use closed loop verification to be certain the production order entered is associated with the worker entering the information
• Use closed loop cerification to verify the operation number correlates with the production order

• A parts storeroom clerk issued parts in quantities 10% lower than those indicated on several materials requisitions and stole the excess quantities.

The discrepancy should show up in an unfavorable materials usage variance, since the shortage will necessitate requesting additional goods. To deter this type of problem:

• Have the recipient of the materials sign for the quantity received
• Have the recipient of the materials held accountable for discrepencies

• A production manager stole several expensive machines and covered up the loss by submitting a form to the accounting department indicating that the missing machines were obsolete and should be written off as worthless.

• Have write offs for assets authorized by two managers
• Have the machinery inspected by a disinterested party before processing the write off
• Restrict authority for expensive machinery to executive management
• Accurately record/document the entire acquisition and disposal processes

• The quantity-on-hand balance for a key component shows a negative balance.

• Reconcile recorded inventory with physical inventory amounts
• Use sign checks to ensure use of the appropriate arithmetic sign
• Investigate errors to detect cause and correct it

• A factory supervisor accessed the operations list file and inflated the standards for work completed in his department. Consequently, future performance reports show favorable budget variances for that department.

• Log all changes to operations list file and review data in a timely way
• Restrict access to the operations list file to management of the engineering/design department
• Analyze variances between the standard usage and actual usage

• A factory supervisor wrote off a robotic assembly machine as being sold for salvage, but actually sold the machine and pocketed the proceeds.

• Authorization for asset write offs should be limited to management or executives
• Accurately record/document the entire asset disposal process
• Require assets for write off be authorized by two managers
• Have the machinery inspected by a disinterested party before processing the write off

• Overproduction of a slow-moving product resulted in excessive inventory that had to eventually be marked down and sold at a loss.

• Utilize information from customer orders, sales forecasts, and current inventory counts to develop an accurate master production schedule.

• describe the development,
• the controller’s role, and
• the effect on production cycle threats.
• For all written responses use complete sentences, APA, proper grammar, include citations within the text and cite sources when appropriate.

Ford Motor Company has developed IntoSite to help address the difficulties of sharing best practices across sites and fostering communication between widely dispersed manufacturing centers (Greenfield, 2014). IntoSite is “a software-as-a service application that uses a cloud-based web application using the Google Earth infrastructure to provide virtual navigation within Ford’s assembly plants” (Greenfield, para. 2). The site, accessible via a web browser, holds 2D and 3D versions of Ford’s assembly plants and allows users to obtain a better understanding of processes by navigating virtually through the plant and workstations (Greenfield). Not only can the user view a video but engineers can also add pins at specific spots to input relevant information on parts, processes, or key issues as well as provide simulations so workers see how to perform a job properly (Greenfield).

IntoSite is also beneficial in financial and accounting areas. The “software allows production managers to look at a job before it becomes a job on the assembly line” (Greenfield, 2015, para. 6). The data gleamed from the software helps manage costs because there is better scheduling of labor hours and ordering of raw materials as well as more control of manufacturing overhead. In addition, controllers have data that is more relevant for the allocation of costs, which are lower because of the efficient streamlining of processes across locations through globally shared databases (Greenfield).

River, NJ: Pearson Education, Inc.

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