Avatar Financials, Inc., located on Madison Avenue in New York City, is a company that provides financial advice to individuals and small to mid-sized businesses.Its primary operations are in wealth management and financial advice. Each client has an account where basic personal information is stored at a server within the main office in New York City. The company also keeps the information about the amount of investment of each client on a separate server at their data center in Bethlehem, Pennsylvania. This information includes the total value of the portfolio, type of investments made, the income structure of each client, and associated tax liabilities.Avatar decided to purchase software for asset management from specialized vendors. This software allows them to run analytics on the portfolios and run detailed simulations of market trends and is called Siman (SIMulation ANalytics). V-Dot Solutions, another contractual company that is customizing and installing Siman, has sent a team of six systems analysts to carry out this task. They anticipate additional hardware installations to run the simulation analytics on Siman. V-Dot’s setup requires them to train two people fromAvatar who will be responsible for minor issues and basic maintenance of the system. Special consultants from V-Dot will deal with major problems and issues. It takes 4 weeks to completely have the system operational and integrated into Avatar’s existing computer system. The testing phase of the project has been readjusted to allow the two employees of Avatar to run these tests and ensure compatibility.A year after the installation of the simulation software Siman, Avatar finds it very useful. To upgrade the systems to the next level, they decide to go to another data source company for a raw market data feed that will be used to run the simulations. However, this requires changes to the source code of Siman. Fortunately, within its analytics department that uses Siman,Avatar has two programmers who are well versed in the programming language that Siman was written in. These programmers are able to implement the changes that will allow Siman-II to use the new data feed.To remain competitive, Avatar has placed the programmers under a tight time constraint. To expedite the process, the documentation process is shortened with the intention that it will be looked into once the systems are running. The programmers also will be deployed back to the maintenance operations once the project is complete. The contract with Siman’s original vendor, V-Dot, has expired and the company does not want to extend their maintenance services for another year. Instead, it believes that these two programmers will be able to perform the same tasks for less money.Requireda. Discuss the major internal control issues in Avatar’s systems development approach.b. Comment on the duties the two programmers of Avatar perform. Are systems maintenance and program development extensions of the same responsibility?c. Identify potential issues that might arise due to weak internal controls.
Avatar Financials, Inc., located on Madison Avenue in New York City, is a company that provides financial advice to individuals and small to mid-sized businesses.
Its primary operations are in wealth management and financial advice. Each client has an account where basic personal information is stored at a server within the main office in New York City. The company also keeps the information about the amount of investment of each client on a separate server at their data center in Bethlehem, Pennsylvania. This information includes the total value of the portfolio, type of investments made, the income structure of each client, and associated tax liabilities.
Avatar decided to purchase software for asset management from specialized vendors. This software allows them to run analytics on the portfolios and run detailed simulations of market trends and is called Siman (SIMulation ANalytics). V-Dot Solutions, another contractual company that is customizing and installing Siman, has sent a team of six systems analysts to carry out this task. They anticipate additional hardware installations to run the simulation analytics on Siman. V-Dot’s setup requires them to train two people from
Avatar who will be responsible for minor issues and basic maintenance of the system. Special consultants from V-Dot will deal with major problems and issues. It takes 4 weeks to completely have the system operational and integrated into Avatar’s existing computer system. The testing phase of the project has been readjusted to allow the two employees of Avatar to run these tests and ensure compatibility.
A year after the installation of the simulation software Siman, Avatar finds it very useful. To upgrade the systems to the next level, they decide to go to another data source company for a raw market data feed that will be used to run the simulations. However, this requires changes to the source code of Siman. Fortunately, within its analytics department that uses Siman,
Avatar has two programmers who are well versed in the programming language that Siman was written in. These programmers are able to implement the changes that will allow Siman-II to use the new data feed.
To remain competitive, Avatar has placed the programmers under a tight time constraint. To expedite the process, the documentation process is shortened with the intention that it will be looked into once the systems are running. The programmers also will be deployed back to the maintenance operations once the project is complete. The contract with Siman’s original vendor, V-Dot, has expired and the company does not want to extend their maintenance services for another year. Instead, it believes that these two programmers will be able to perform the same tasks for less money.
Required
a. Discuss the major internal control issues in Avatar’s systems development approach.
b. Comment on the duties the two programmers of Avatar perform. Are systems maintenance and program development extensions of the same responsibility?
c. Identify potential issues that might arise due to weak internal controls.
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