Soap Shop, an e-tailer, had its vendor website shut down for three days due to a denial of service attack. The company’s vendor website is an auction-based system where vendors compete to supply specific products at the lowest price. As Soap Shop uses a JIT system, it could not fill orders on its etail website which remained open for customer’s orders during the two days. Michael, the controller, estimates the dollar value of the unfillable customer’s orders over the two-day period is $700,000. He believes that forty percent of those orders can be filled. The restoration and analysis labor costs of repairing the system are $220,000. The normal rate of return on sales for Soap Shop is 20 percent due largely to the internet auction systems used with vendors. The shutdown of the vendor site required the emergency purchase of soap and lotion products from higher-priced vendors and increased shipping costs that together totaled $200,000. Michael believes the shutdown will affect Soap Shop’s rate of return. He provides the following estimates: (1) 40 percent chance of 10-percent decrease; or a 60 percent chance of a 25-percent decrease. Choose ONE topic to discuss. Be sure to reply to two different topics than your original post. Outline the tangible and intangible losses as a result of the cyberattack. Explain why denial of service attacks are such a danger to online retailers. How does the company’s method in selecting a vendor relate to systemic risk? Estimate the preliminary loss for Soap Shop. Summarize the process used to arrive at your calculation.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter3: Internal Control Over Financial Reporting: Responsibilities Of Management And The External Auditor

Section: Chapter Questions

Problem 18RQSC

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Soap Shop, an e-tailer, had its vendor website shut down for three days due to a denial of service attack. The company’s vendor website is an auction-based system where vendors compete to supply specific products at the lowest price. As Soap Shop uses a JIT system, it could not fill orders on its etail website which remained open for customer’s orders during the two days. Michael, the controller, estimates the dollar value of the unfillable customer’s orders over the two-day period is $700,000. He believes that forty percent of those orders can be filled. The restoration and analysis labor costs of repairing the system are $220,000. The normal rate of return on sales for Soap Shop is 20 percent due largely to the internet auction systems used with vendors. The shutdown of the vendor site required the emergency purchase of soap and lotion products from higher-priced vendors and increased shipping costs that together totaled $200,000. Michael believes the shutdown will affect Soap Shop’s rate of return. He provides the following estimates: (1) 40 percent chance of 10-percent decrease; or a 60 percent chance of a 25-percent decrease.

Choose ONE topic to discuss. Be sure to reply to two different topics than your original post.

Outline the tangible and intangible losses as a result of the cyberattack.
Explain why denial of service attacks are such a danger to online retailers.
How does the company’s method in selecting a vendor relate to systemic risk?
Estimate the preliminary loss for Soap Shop. Summarize the process used to arrive at your calculation.

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