BU1009 Business Information Systems Tutorial 1

Chapter 1 Review Questions (p. !" 2, 3, 4, 6, 7, 14, 20 #is$ussion Questions (p. %" 1, 3, 5, 9, 16 &ro'lems (p. 9" 1, 2, 3 Su((este) *nswers to the a'ove +uestions, Review Questions . -hat is the relationship amon( )ata.information.an) an information system /
2. Data are facts that are collected in a raw form and made meaningf l thro gh !rocesses s ch as sorting, aggregating, classif"ing, mathematicall" mani! lating, and s mmari#ing. $he meaningf l data is considered to %e information. 3. Disting ish %etween &'( and )'( * 3. &'(s !rocess financial transactions and certain nonfinancial transactions that directl" affect the !rocessing financial transactions. $he e+ternal financial re!orting doc ments of &'( are s %,ect to legal and !rofessional standards. -onse. entl", management and acco ntants ha/e greater legal res!onsi%ilit" for &'( a!!lications than for )'( a!!lications. $he )'( !rocesses nonfinancial transactions that are o tside the sco!e of the &'(. )'( a!!lications e+!and the information set !ro/ided to s ch areas as !rod ction, sales, mar0eting, and in/entor" management. )'( often draws from and % ilds on data from the &'(. 4. 1hat are the three c"cles or transaction !rocessing s"stems 4. 2e/en e c"cle, e+!endit re c"cle, and con/ersion c"cle. 7. 1hat r les go/ern data collection * 7. 2ele/ance and efficienc". 14. Disting ish the roles of internal and e+ternal a ditors * 14. 'nternal a ditors are res!onsi%le for in3ho se a!!raisal of the financial re!orting s"stem. 'nternal a ditors are concerned with deterring and detecting fra d and for cond cting 4D5 a dits. 4+ternal a ditors are inde!endent -5&s engaged %" the firm to attest to the com!leteness and acc rac" of the financial statements. 4+ternal a ditors wor0 together with the internal a ditors.

20. 1hat two roles are !la"ed %" acco ntants with res!ect to the information s"stem* 20. 6sers, s"stem designers, and s"stem a ditors.

#is$ussion Questions (p. 09" 1, 3, 5, 9, 16 1. D'(-6(( $74 D'884249-4( :4$1449 '9$429&; &9D 4<$429&; 6(42( =8 '98=2)&$'=9 (>($4) 1. $he re!orting re. irements of e+ternal sers s ch as lending instit tions, the irs, the sec, and stoc0holders are s %,ect to stringent re!orting standards. $h s, firms ha/e historicall" !laced a /er" high em!hasis on the acc rac" of the aiss and the re!orts the" !rod ce for e+ternal agencies since fail re to !ro/ide acc rate and timel" information carries hea/" !enalties. 'nternal sers, s ch as managers, also need /ital information to ma0e good decisions. 8irms are %eginning to reali#e that the needs of these internal sers are also /er" im!ortant to efficientl" and effecti/el" o!erate and !lan for the f t re. 3. Disting ish %etween financial and nonfinancial transactions. ?i/e 3 e+am!les 3. 8inancial transactions affect the acco nts in the %alance sheet in some manner. $hree e+am!les are 1@ se of e. i!ment3de!reciation, 2@ !a"ment of a %ond !a"a%le, and 3@ recei!t of cash from a c stomer for a sale !re/io sl" made on acco nt. 9onfinancial transactions incl de % siness e/ents that do not im!act the financial statements. $hree e+am!les are 1@ a %oo0 chec0ed o t %" a st dent in a school li%rar", 2@ the recording of a c stomer com!laint /ia a toll3free hotline, and 3@ stat s re!orts of research and de/elo!ment !ro,ects.

5. Do thin0 transaction !rocessing s"stems differ significantl" %etween ser/ice and man fact ring ind stries * 5. $he transaction !rocessing s"stems onl" differ in the t"!es of data elements collected. :oth ser/ice and man fact ring ind stries need to collect data regarding % siness !rocesses. 1hile a man fact ring firm ma" collect data regarding the amo nt of scra! generated at a !artic lar wor0station, a ser/ice firm, s ch as a ! %lic acco nting firm, needs to collect data regarding the n m%er of ho rs s!ent %" staff to /erif" cash %alances. $ransaction !rocessing s"stems are e. all" im!ortant to %oth t"!es of ind stries. 9.Disc ss what is meant %" the statement, $he acco ting s"stem is a conce!t al flow of information that re!resents !h sical !ersonnel,machiner", and flows of raw metarials and cash thro gh the organi#ation. 9. $his statement means that the acco nting s"stem is a re!resentation of the o!erations of a firm. &s machines o!erate, wor0ers !erform their d ties, raw materials are transferred into finished goods and cash flows are e+changed %etween s !!liers and c stomers, the acco nting s"stem m st %e contin o sl" !dated to acc ratel" reflect these actions. $his conce!t al flow is cr cial %eca se it allows management to /iew in s mmar" and in detail the financial effects of these o!erations on the firm. 16. Descri%e clo d com! ting and e+!lain how it is similar to o%taining a commodit" !rod ct. 16. -lo d com! ting, is location3inde!endent com! ting where%" shared data centers deli/er hosted '$ ser/ices o/er the 'nternet. $he conce!t can %e e. ated to the wa" in which electricit" is deli/ered to a !ri/ate home. $he homeowner enters into a contract with the local ! %lic tilit" com!an" to deli/er electricit" as needed. $he ! %lic tilit" com!an" ma" generate some of this electricit", % t d ring high demand !eriods it will go to the national electric grid to ta! into the !rod ction of other electricit" generators across the co ntr". (imilarl", an organi#ation ! rs ing clo d com! ting signs a contract with an '$ ser/ice !ro/ider to !ro/ide com! ting reso rces. 1hen demand e+ceeds the !ro/iderAs '$ ca!acit", it ac. ires additional ca!acit" from data centers in the clo d that are connected /ia the 'nternet. & !otential ris0 to the client firm is that it does not necessaril" 0now where its data are act all" %eing !rocessed, , st as the homeowner does not 0now where his or her electricit" is %eing generated. $he ad/antage to the client organi#ation is access to whate/er com! ting !ower it needs, while it !a"s onl" for what it ses.

&ro'lems 1, 2, 4
1. a. (

%. c. d. e. f. g. h. i. ,.

' ( $ ( ( ( ' $ (

2. $he missing element is feed%ac0. 8eed%ac0 is cr cial to determine when it is necessar" to ad, st data collection !roced res or data3!rocessing elements to satisf" the needs of internal and e+ternal end sers. 3. &'( data wo ld incl de historical sales data %" c stomer and !rod ct line, gross margin and !rofit %" !rod ct line, and sales ret rn data %" c stomer and !rod ct line. )'( data wo ld incl de c stomer com!laints, a/erage deli/er" time from order !lacement to recei!t of goods, and reasons for ret rn of merchandise. :enefits of integrating the information wo ld incl de more efficient re!orting and enhanced nderstanding of ca sal effects of the non3financial B)'(@ !erformance metrics on the firmAs financial res lts B&'(@. 4. a. %. c. d. e. f. g. h. i. ,. 0. )2( $5( 82( )2( $5( 82( )2( $5( 82( $5( )2(

BU1009 Business Information Systems Tutorial

Chapter Review Questions (p. 10" 2, 4, 5, 9, 10, 12, 15, 25, 37 #is$ussion Questions (p. 11" 1, 3, 4, C, 12, 1C

&ro'lems (p. 12" 1, 2, 11

Su((este) *nswers to the a'ove +uestions, Review Questions 2. 9ame the ma,or s %s"stems of the e+!endit re c"cle. 2. 5 rchasesDacco nts !a"a%le s"stem, cash dis% rsements s"stem, and !a"roll s"stem. 4. 9ame the ma,or s %s"stems of the con/ersion c"cle. 4. 5rod ction s"stem and cost acco nting s"stem. 5. 9ame the ma,or s %s"stems of the re/en e c"cle. 5. (ales order !rocessing s"stem and cash recei!ts s"stem. 9. 9ame the two t"!es of ledgers. 9. ?eneral ledger and s %sidiar" ledger. 10. 1hat is an a dit trail* 10. & trail that allows the a ditor to %egin with a s mmar" total fo nd on the financial statements and trac0 it %ac0 to the indi/id al transactions that ma0e ! this total. -on/ersel", an a ditor sho ld %e a%le to trac0 transactions to their final im!act on the financial statements. 12. -om! ter3%ased s"stems em!lo" fo r t"!es of files. 9ame them. 12. )aster files, transaction files, reference files, and archi/e files. 15. ?i/e an e+am!le of how cardinalit" relates to % siness !olic". 15. -ardinalit" reflects normal % siness r les as well as organi#ational !olic". 8or instance, the 1E1 cardinalit" in the first e+am!le in 8ig re 2312 s ggests that each sales!erson in the organi#ation is assigned one a tomo%ile. 'f instead the organi#ationAs !olic" were to assign a single a tomo%ile to one or more sales!eo!le that share it, this !olic" wo ld %e reflected %" a 1E) relationshi!. 25. 1h" might an a ditor se a !rogram flowchart* 25. 1hen testing an a!!lication !rogram, the a ditor needs details a%o t its internal logic !ro/ided %" the !rogram flowchart to design the a dit tests. 37. 1hat are some of the more common ses of data codes in acco nting information s"stems*

37. :loc0 codes for the general ledger acco nts, se. ential codes for doc ments, and gro ! codes for
coding transactions.

#is$ussion Questions 1, 3, 4, C, 12, 1C 1. #is$uss the flow of $ash throu(h the transa$tion $y$les. 1. -ash flows into the firm from sales made to c stomers. $he sales order !rocessing s %s"stem of the re/en e c"cle ca!t res the intent of c stomers to e+change cash for ser/ices or goods man fact red. $"!icall" sales are made on credit. $he cash recei!ts s %s"stem of the re/en e c"cle ca!t res the act al recei!t of cash. De!ending on the credit terms and !rom!tness of !a"ment %" the c stomer, the lag %etween the sales order !rocessing s %s"stem and the cash recei!ts s %s"stem ma" %e da"s, wee0s, or months. $he cash inflow allows the organi#ation to ! rchase raw materials, !a" wor0ers, and % " ca!ital assets necessar" to man fact re the !rod ct Bor to !ro/ide ser/ices@. $he raw materials re. irements are determined %" the !rod ction !lanning s %s"stem of the con/ersion c"cle. $hese re. irements trigger orders %eing !laced thro gh the ! rchasesDacco nts !a"a%le s %s"stem of the e+!endit re c"cle. 8or credit sales, the cash is ltimatel" released once the goods are recei/ed Bor ser/ices are !erformed@ and an in/oice has %een recei/ed. $he lag %etween recei/ing goods and dis% rsement of cash ma" %e da"s or wee0s. -ash is also dis% rsed to em!lo"ees, t"!icall" after ser/ices are rendered %" the em!lo"ees. $he lag is s all" no more than one3half a month for salaried em!lo"ees and as short as one3half a wee0 for ho rl" wage earners. $he !a"roll s %s"stem of the e+!endit re s"stem ca!t res these dis% rsements to em!lo"ees. 3. Disc ss the role of the con/ersion c"cle for ser/ice and retailing entities. 3. $he con/ersion c"cle acti/ities for ser/ice and retailing entities incl de !lanning the items to ! rchase or the ser/ices to !rod ce, !lanning the wor0force to accom!lish the necessar" tas0s Be+tremel" cr cial in ser/ice entities@, and directing the wor0force in !erforming the ser/ice or selling the good. 4. -an a t rnaro nd doc ment contain information that is s %se. entl" sed as a so rce doc ment*

4.

>es. 8or e+am!le, the remittance ad/ice of a %ill that is ret rned with the !a"ment ser/es as a so rce doc ment for the cash recei!ts transaction !rocessing s"stem. $h s, the !rod ct doc ment %ecomes a so rce doc ment.

C. 1hat role does the a dit trail !la" in the tas0 of confirmation* C. -onfirmation is most t"!icall" sed for confirming the acco nts recei/a%le acco nt as re!orted on the %alance sheet. $he a dit trail is sed to trace from the general ledger acco nts recei/a%le control acco nt to the s %sidiar" acco nt, and then to s!ecific c stomer acco nts. & sam!le of the c stomer acco nts is then selected for confirmation. 12. 'f an organi#ation !rocesses large n m%ers of transactions that se common data records, 12. ;arge3scale s"stems that !rocess high /ol mes of transactions often se real3 time data collection and %atch !dating. )aster file records that are ni. e to a transaction, s ch as c stomer acco nts and indi/id al in/entor" records, can %e !dated in real time witho t ca sing o!erational dela"s. -ommon acco nts sho ld %e !dated in %atch mode. 2eal3time !rocessing is %etter s ited to s"stems that !rocess lower transaction /ol mes and those that do not share common records. 1C. Disc ss some of the !ro%lems associated with general ledgers s"stems that do not ha/e data coding schemes. 1C. 6ncoded data ta0es a great deal of recording s!ace, is time3cons ming to record and is !rone to man" t"!es of errors. -onsider a firm that man fact res %ic"cles and carries in its in/entor" reflector lights. $he lights come in si+ si#es, 2 colors, and 4 different grades of material. $h s, 4C different /arieties of reflector light are held B6+2+4@. 4/er" time lights are ! rchased, the descri!tion wo ld need to %e incl ded rather than a code. 8or e+am!le if 100 nits of one t"!e of reflector light were ! rchased, and 200 nits of another were ! rchased from -ollins )an fact rer in 2oano0e, Firginia, the ,o rnal entr" wo ld %eE 'n/entor"32, "ellow, metal reflector light 75 'n/entor"33, orange, !lastic reflector light &D53-ollins )nf32oano0e, F&

120 195

(ome !ro%lems this a!!roach ma" !rod ce are 1. the sales staff will ha/e a more tedio s ,o% in writing ! orders, and more errors ma" occ r Bi.e. what if the" forget to write the color or material t"!e*@, 2. the wareho se !ersonnel will ha/e a more diffic lt time locating and !ic0ing the goods for shi!ment, and again more errors ma" occ r, and 3. the acco nting !ersonnel will also ha/e a more tedio s ,o% !osting to the s %sidiar" ledgers and errors ma" occ r.

&ro'lems 1. a. 4+!endit re c"cle3!a"roll s %s"stem. %. -on/ersion c"cle3!rod ction s"stem s %s"stem. c. 2e/en e c"cle3cash recei!ts s %s"stem.. d. 2e/en e c"cle3sales order !rocessing s %s"stem. e. 4+!endit re c"cle3! rchases s %s"stem. f. -on/ersion c"cle3!rod ction s %s"stem. a. %. c. d. e. f. g. h. master file transaction file reference file archi/e file master file transaction file reference file archi/e file

2.

BU1009 Business Information Systems Tutorial 0

Chapter 0 Review Questions (p. 1 9" 1, 6, 9, 10, 16, 33, 35, 36, 37 #is$ussion Questions (p.100" 4, C, 15, 22 &ro'lems (p 102" 1, 4 Su((este) *nswers to the a'ove +uestions, Review Questions 1. 1hat is ethics* 1. 4thics !ertain to the !rinci!les of cond ct that indi/id als se in ma0ing choices and g iding their %eha/ior in sit ations that in/ol/e the conce!ts of right and wrong. 6. 1hat is com! ter ethics* 6. -om! ter ethics concern the ethical se of hardware, software, and data%ases as well the societal im!acts of s ch items. 9. 1hat are the com! ter ethical iss es regarding !ri/ac"* 9. 'ndi/id als wish to ha/e control o/er what information is 0e!t a%o t them and to whom this information is disseminated. Data%ases e+ist that store s ch items as merchandise ! rchases and mo/ie rentals. : sinesses oftentimes trade andDor sell the information 0e!t in these data%ases. $he ethical iss es regarding the transfer of this information is a !ri/ac" ethics . estion. 10. 1hat are the com! ter ethical iss es regarding sec rit"* 10. $he ethical iss es regarding com! ter sec rit" center on na thori#ed access to s"stems and data%ases. 'ndi/id als can %e harmed %" the dissemination of inacc rate information to a thori#ed sers, andDor acc rate information to na thori#ed sers. (ec rit" can %e sed to !rotect s"stems and !ersonal information, % t it can also restrict legitimate access. 16. 1hat are the com! ter ethical iss es regarding mis re of com! ters*

16.

$he ethical com! ter iss es regarding mis se of com! ters are the co!"ing of !ro!rietar" software, sing a com!an"As com! ter for !ersonal %enefit, and snoo!ing thro gh other !eo!leAs files. (ho ld em!lo"ees %e allowed to do !ersonal wor0 on the com!an" com! ter after wor0 ho rs* Does this additional se im!inge on the rights of the software com!an"* 'f the em!lo"ee does not ha/e to % " hardware andDor software for !ersonal se, then an ethical iss e arises regarding !otential lost !rofits to the ind stries selling these !rod cts.

33. 1hat are the fo r %road o%,ecti/es of internal control* 33. a. to safeg ard the assets of the firm. %. to ens re the acc rac" and relia%ilit" of acco nting records and information. c. to !romote efficienc" in the firmAs o!erations. d. to meas re com!liance with managementAs !rescri%ed !olicies and !roced res. 35. ?i/e an e+am!le of a !re/enti/e control. 35. 5asswords and data3entr" controls for each #one Be.g. range chec0s@. 36. ?i/e an e+am!le of a detecti/e control. 36. & log of sers, a com!arison with com! ter totals and %atch totals. 37. ?i/e an e+am!le of a correcti/e control. 37. )an al !roced res to correct a %atch that is not acce!ted %eca se of an incorrect (ocial (ec rit" n m%er. & clerical wor0er wo ld need to in/estigate and determine either the correct hash total or the correct (ocial (ec rit" n m%er that sho ld %e entered. #is$ussion Questions 2. -hen a $ompany has a stron( internal $ontrol stru$ture. sto$3hol)ers $an e4pe$t the elimination of frau). 4. & strong internal control str ct re !ro/ides a /er" good shield against fra d. 7owe/er, these shields are not 100 !ercent % llet!roof, es!eciall" when em!lo"ees coll de andDor to! management is in/ol/ed. & strong internal control str ct re co !led with good em!lo"ee morals and ethics is the %est deterrence against fra d. C. Disc ss the conce!t of e+!os re and e+!lain wh" firms ma" tolerate some e+!os re. C. &n e+!os re is the a%sence or wea0ness of an internal control. (ometimes cost3 %enefit anal"sis ma" indicate that the additional %enefits of an internal control !roced re ma" not e+ceed the costs. $h s, the firm ma" decide to tolerate some control ris0.

15. Distingg ish %etween e+!os re and ris0.

15.

54posures are wea0nesses in the internal control s"stem. 8or e+am!le, assigning the same cler0 res!onsi%ilit" for recei/ing and %oo0ing cash and also !dating acco nts recei/a%le is an e+!os re. Ris3s relate to the !otential conse. ences of e+!os res. $he ris0 associated with this e+!os re is that the cler0 will !er!etrate a fra d s ch as la!!ing.

22. 1h" are the com! ter ethics iss es of !ri/ac", sec rit", and !ro!ert" ownershi! of interest to acco ntants* 22. &riva$y is the degree of restricted access to !ersonal data. $he creation and maintenance of h ge, shared data%ases ma0es it necessar" to !rotect indi/id als Band organi#ations@ from the !otential mis se of s ch data. $his raises the iss e of ownershi! in the !ersonal information ind str". 1h" can client firms that are nrelated to indi/id als % " and sell information a%o t those indi/id als witho t their !ermission* (ho ld !ri/ac" %e !rotected thro gh !olicies and s"stems of internal controls within the firms that hold the data* 'f so, the a ditors of the firms ma" need to de/elo! standards for assessing s ch controls in their clientAs s"stems. -om! ter se$urity is an attem!t to a/oid ndesira%le e/ents s ch as illegal access to s"stems that res lt in loss of confidentialit" or data integrit". 7owe/er, sec rit" can %e sed %oth to !rotect !ersonal !ro!ert" and to ndermine freedom of legitimate access to data. & tomated monitoring can %e sed %oth to detect intr ders and to s!" on legitimate sers, th s diminishing their !ri/ac". & ditors are in !osition to determine where this line is to %e drawn and to assess the effecti/eness and a!!ro!riateness of sec rit" meas res in !lace. ;aws designed to !reser/e real property ownership rights ha/e %een e+tended to co/er what is referred to as intellect al !ro!ert", s ch as com! ter software. $he . estion here %ecomes, what can an indi/id al Bor organi#ation@ own* 'deas* )edia* (o rce code* =%,ect code* -o!"right laws ha/e %een in/o0ed in an attem!t to !rotect those who de/elo! software from ha/ing it co!ied. 7owe/er, man" %elie/e the co!"right laws can ca se more harm than good. 8or e+am!le, sho ld the loo0 and feel of a software !ac0age %e granted co!"right !rotection* $he ;eag e for 5rogramming 8reedom arg es that the %est interest of com! ter sers is ser/ed when ind str" standards emergeG co!"right laws wor0 to disallow this. 'ss es relating to ownershi! and /al ation of digital !ro!ert" are c rrentl" nder re/iew %" the acco nting !rofession. ;egal resol tion ma" ha/e !otentiall" !rofo nd im!lications for %oth acco nting firms and their clients. 8or e+am!le, since !atent searches are e+!ensi/e and nrelia%le, !rogrammers Band their organi#ations@ ma" %e s ed for inad/ertentl" sing a com! ter !rocess on which someone else holds the !atent. ( ch an en/ironment increases % siness ris0 and associated a dit ris0. &ro'lems 1. $his is an e+am!le of conflict of interest.

-ontrols sed to !re/ent or detect this fra d incl deE

$he 7ome 'm!ro/ements -om!an" sho ld esta%lish a formal !olic" stating its !osition on % siness transactions with em!lo"ees. 'f s ch transactions are to %e !ermitted, the" sho ld %e formall" and e+!licitl" declared %" the em!lo"ees and a!!ro/ed %" management !rior to an" transactions. $he organi#ation sho ld esta%lish a /alid /endor file, which is a list of a!!ro/ed s !!liers. 9o transactions B!artic larl" dis% rsements of cash@ are to %e !ermitted with s !!liers that are not on the list witho t formal management a!!ro/al. 'nde!endent /erification of transactions thro gh management re!orts co ld %e sed to identif" n s al % siness !atterns and material changes in acco nts. 8or e+am!le, a re!ort co ld s mmari#e transaction /ol mes to /endors and anal"#e rele/ant financial ratios s ch as cost3of3sales to sales across !eriods. a. $hese two tas0s need to %e se!arated since ha/ing the res!onsi%ilit" for writing off %ad de%ts Basset3acco nts recei/a%le@ and reconciling acco nts recei/a%le and the general ledger control acco nt assets creates the !otential for fra d lent %eha/ior. %. $hese two tas0s do not need to %e se!arated since the two tas0s are 'nde!endent of one another. c. 'n neither case does the em!lo"ee ha/e access to the assetsG therefore no danger e+ists. d. $hese two tas0s do not need to %e se!arated since the two tas0s are inde!endent of one another. e. $hese tas0s sho ld %e se!arated. $he em!lo"ee records the transactions and has access to assets. $o allow the em!lo"ee to /erif" the acc rac" of the records wo ld allow him or her to co/er ! an" mone" em%e##led %" doctoring the %an0 reconciliation.

4.

BU1009 Business Information Systems Tutorial 2

Chapter 2 Review Questions (p. 119" 1, 3, 5, 6, 11, 16 #is$ussion Questions (p. 190"

1, 4, 7, 9 &ro'lems (p. 191" 4 Su((este) *nswers to the a'ove +uestions, Review Questions 1. 1hat doc ment initiates the sales !rocess* 1. & c stomer order s all" in the form of a ! rchase order initiates the sales !rocess. 0. -hat fun$tion )oes the re$eivin( )epartment serve in the revenue $y$le/ 3. $he recei/ing de!artment co nts and ins!ects items that are ret rned %" c stomers. $he recei/ing de!artment !re!ares a ret rn sli!, co!ies of which go to the wareho se for restoc0ing, and to the sales order de!artment so that a credit memo can %e iss ed to the c stomer. !. -hat are three authori6ation $ontrols/ 5. a. credit chec0s %. ret rns !olic" for granting cash ref nds and credits, and c. cash !relists !ro/iding /erification that c stomer chec0s and remittance ad/ices match in amo nt. %. -hat are the three rules that ensure that no sin(le employee or )epartment pro$esses a transa$tion in its entirety/ 6. $he three r les that ens re segregation of f nctions areE a. %. c. $ransaction a thori#ation sho ld %e se!arate from transaction !rocessing. &sset c stod" sho ld %e se!arate from asset record 0ee!ing. $he organi#ation str ct re sho ld %e s ch that the !er!etration of a fra d re. ires coll sion %etween two or more indi/id als.

11. -hat are the 3ey features of a &7S system/ 11. & !oint of sale s"stem immediatel" records %oth cash and credit transactions and in/entor" information. $he sales ,o rnal, acco nts recei/a%le, and in/entor" acco nts ma" %e !dated in real3time, or a transaction file ma" %e sed to later !date a master file. 1%. -hat assets are at (reatest ris3 in a &7S system/ 16. -ash and in/entor". #is$ussion Questions

1, 4, 7, 9 1. 1h" do firms ha/e se!arate de!artments for wareho sing and shi!!ing* 1. $he se!aration of the wareho se and the shi!!ing de!artment allows for segregation of f nctions o/er two de!artments for the c stod" of the assets d ring two distinct !hases of the re/en e c"cle. $he wareho se attendants ha/e c stod" o/er the finished goods ntil the" recei/e a stoc0 release form from the sales de!artment. $he wareho se cler0s !ic0 the in/entor" items from the wareho se and send them to shi!!ing along with a co!" of the stoc0 release form. $he shi!!ing de!artment is onl" a%le to shi! goods that it recei/es from the wareho se !ersonnel. 8 rther, it m st match the goods with a !ac0ing sli! and shi!!ing notice that originates from the sales de!artment. $h s, wareho se !ersonnel are not allowed to shi! o t an" na thori#ed in/entor" items %eca se the shi!!ing !ersonnel wo ld not ha/e the corres!onding !a!erwor0. $he additional !a!erwor0 re. ired is considered a necessar" cost for the added %enefit of control o/er in/entor". $he wareho se !ersonnel do not 0ee! the formal acco nting records. $he asset c stodial tas0s m st %e 0e!t se!arate from the formal record30ee!ing tas0s. $he in/entor" control 0ee!s the formal acco nting records of in/entor" stoc0 items. 4. 4+!lain how segregation of d ties is accom!lished in an integrated data !rocessing en/ironment. 4. 'n this en/ironment, segregation of d ties is accom!lished thro gh m ltile/el sec rit" !roced res. ) ltile/el sec rit" em!lo"s !rogrammed techni. es that !ermit sim ltaneo s access to a central s"stem %" man" sers with different access !ri/ileges % t !re/ents them from o%taining information for which the" lac0 a thori#ation. 7. 1h" is access control o/er re/en e c"cle doc ments , st as im!otant as the !h"sical control de/ices o/er cash and in/entor"* 7. &ccess control to the %illing and acco nts recei/a%le records that are !art of the re/en e c"cle is , st as im!ortant as the !h"sical control de/ices o/er cash and in/entor" %eca se these records affect the collecti%ilit" of an assetH acco nts recei/a%leHwhich sho ld e/ent all" %e con/erted into cash. 'f these records are not ade. atel" controlled, in/entor" ma" not %e ltimatel" con/erted into the cash amo nt deser/ed %" the firm. 9. 1hat financial statement misre!resentations ma" res lt from an inconsistentl" a!!lied credit !olic"* :e s!ecific. 9. a. &cco nts recei/a%le ma" %e o/erstated %eca se allowance for do %tf l acco nts is nderstated d e to !oor credit !olic". %. :ad de%t e+!ense ma" %e nderstated.

&ro'lems 4. &ll are !ro!er segregation of f nctions e+ce!t %. $he sales de!artment sho ld not %e allowed to a!!ro/e credit memos since it co ld !otentiall" o/erstate sales in one !eriod to meet . otas and %oost %on ses and re/erse them in a s %se. ent !eriod. $he recei/ing re!ort indicating that goods ha/e %een recei/ed %" the recei/ing de!artment sho ld %e the so rce doc ment for credit memos and it sho ld %e a thori#ed %" someone inde!endent of the sales de!artment.