Accounting Information Systems
10th Edition
ISBN: 9781337619202
Author: Hall, James A.
Publisher: Cengage Learning,
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Chapter 8, Problem 4P
To determine
Explain the control weaknesses and risks associated with the given scenario.
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Richard Palm is the accounting clerk of Olive Limited. He uses the source documents such as purchaseorders, sales invoices and suppliers’ invoices to prepare journal vouchers for general ledger entries.Each day he posts the journal vouchers to the general ledger and the related subsidiary ledgers. At theend of each month, he reconciles the subsidiary accounts to their control accounts in the generalledger to ensure they balance.Discuss the internal control weaknesses and risks associated with the above process
Case Study A Scenario
A major retailer asked the IS auditor to review their readiness for complying with credit card company requirements for protecting cardholder information. The IS auditor subsequently learned the following information. The retailer uses wireless point-of-sale registers that connect to application servers located at each store. These registers use wired equivalent protection (WEP) encryption.
The application server, usually located in the middle of the store’s customer service area, forwards all sales data over a frame relay network to database servers located at the retailer’s corporate headquarters, and using strong encryption over an Internet virtual private network (VPN) to the credit card processor for approval of the sale.
Corporate databases are located on a protected screened subset of the corporate local area network. Additionally, weekly aggregate sales data by product line is copied from the corporate databases to magnetic media and mailed to a…
ich of the following controls is most likely to help ensure that all credit revenue transactions of an entity are recorded?
Multiple Choice The billing department supervisor matches prenumbered shipping documents with entries in the sales
journal. The billing department supervisor sends a copy of each approved sales order to the credit department for
comparison to the custome authorized credit limit and current account balance. O The accounting department supervisor
independently reconciles the accounts receivable subsidiary ledger to the accounts receivable account each month. A The
accounting department supervisor controls the mailing of monthly statements to customers and investigates any customers.
differences repo
Chapter 8 Solutions
Accounting Information Systems
Ch. 8 - What information is contained in a journal...Ch. 8 - How are journal vouchers used as a control...Ch. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - What is the purpose of a responsibility center...Ch. 8 - Prob. 6RQCh. 8 - Name, in order, the 11 steps of the financial...Ch. 8 - Prob. 8RQCh. 8 - When are adjusting entries made, and what is their...Ch. 8 - Prob. 10RQ
Ch. 8 - Prob. 11RQCh. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Prob. 14RQCh. 8 - What is an XBRL taxonomy?Ch. 8 - Prob. 16RQCh. 8 - Prob. 17RQCh. 8 - Explain how the formalization of tasks promotes...Ch. 8 - Prob. 19RQCh. 8 - Distinguish between narrow and wide span of...Ch. 8 - Prob. 21RQCh. 8 - Prob. 22RQCh. 8 - Contrast the four decision typesstrategic...Ch. 8 - Prob. 24RQCh. 8 - What management levels are more likely to deal...Ch. 8 - Prob. 26RQCh. 8 - Prob. 27RQCh. 8 - Prob. 28RQCh. 8 - What are the two phases of responsibility...Ch. 8 - What are the three most common forms of...Ch. 8 - What is goal congruence?Ch. 8 - Prob. 32RQCh. 8 - Prob. 33RQCh. 8 - Prob. 34RQCh. 8 - Explain some reporting techniques that may cause...Ch. 8 - Prob. 36RQCh. 8 - What types of variances are found on cost center...Ch. 8 - Distinguish between a profit center and an...Ch. 8 - Prob. 39RQCh. 8 - Prob. 40RQCh. 8 - Prob. 41RQCh. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Explain how erroneous journal vouchers may lead to...Ch. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - If management control and strategic planning...Ch. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Why are cost centers considered to be more...Ch. 8 - Explain how a production quota used to evaluate a...Ch. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 21DQCh. 8 - Prob. 22DQCh. 8 - Which of the following statements best describes a...Ch. 8 - Prob. 2MCQCh. 8 - Which of the following is NOT an output report of...Ch. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Hercules Inc. uses a performance reporting system...Ch. 8 - Prob. 8MCQCh. 8 - Which of the following statements is true? a....Ch. 8 - Which of the following budgeting processes is...Ch. 8 - Prob. 11MCQCh. 8 - At what level of management is the long-range...Ch. 8 - Which is the fundamental purpose of responsibility...Ch. 8 - Prob. 14MCQCh. 8 - An investment center is described best by which of...Ch. 8 - Prob. 1PCh. 8 - FINANCIAL REPORTING PROCESS The following contains...Ch. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - ORGANIZATIONAL CHART Prepare an organizational...Ch. 8 - DECISION LEVEL Classify the following decisions as...Ch. 8 - Prob. 10PCh. 8 - ORGANIZATION STRUCTURE AND SPAN OF CONTROL Refer...Ch. 8 - ORGANIZATION STRUCTURE AND SPAN OF CONTROL Refer...Ch. 8 - CMA-ADAPTED ORGANIZATIONAL STRUCTURE While...Ch. 8 - CMA-ADAPTED PERFORMANCE MEASURES The Star Paper...Ch. 8 - Prob. 15PCh. 8 - MANAGEMENT BY EXCEPTION A variety of quantitative...Ch. 8 - Prob. 17P
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- SYSTEM DOCUMENTATION-EXPENDITURE CYCLE (MANUAL AND COMPUTER PROCEDURES) The following describes the expenditure cycle for a hypothetical company. The company has a centralized computer system with terminals located in various departments. The terminals are networked to a computer application, and digital accounting records are hosted on a server in the data processing department. Each day, the computer in the data processing center scans the inventory records looking for items that must be replenished. For each item below its reorder point, the system creates a digital purchase order and prints two hard copies. A technician in the data center sends the purchase orders to the purchasing department clerk. Upon receipt of the purchase orders, the purchasing clerk reviews and signs them. He sends Copy 1 to the supplier and files Copy 2 in the purchasing department. A few days later, the supplier ships the order and the goods arrive at the receiving department. The receiving clerk reviews…arrow_forwardRISK ANALYSIS AND INTERNAL CONTROL The following describes the purchases and cash disbursements procedures for a lawn and garden supply wholesaler that uses a central computer system with distributed terminals in departments. The inventory control clerk visually reviews inventory levels from his computer terminal to identify items that need to be ordered. He then prints and sends a hard copy purchase requisition for the needed items to the purchasing agent. Based on the requisition, the purchasing agent selects a vendor and adds a digital record to the purchase order file from his terminal in the purchasing department. The clerk then prints a hard copy of the purchase order and mails it to the vendor. Finally, the purchasing agent destroys the purchase requisition, which it is no longer needed since the relevant details are on the PO. When the materials arrive at the receiving department a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the…arrow_forwardA company employs three accounts payable clerks and one treasurer. Their responsibilities are as follows: Employee Responsibility Clerk 1 Reviews vendor invoices for proper signature approval Clerk 2 Enters vendor invoices into the accounting system and verifies payment terms Clerk 3 Posts entered vendor invoices to the accounts payable ledger for payment and mails checks. Treasurer Reviews the vendor invoices and signs each check. Which of the following would indicate a weakness in the company’s internal control?a. Clerk 1 opens all of the incoming mail.b. Clerk 2 reconciles the accounts payable ledger with the general ledger monthly.c. Clerk 3 mails the checks and remittances after they have been signed.d. The treasurer uses a stamp for signing checks.arrow_forward
- NTERNAL CONTROLThe following is a description of manufacturing com-pany’s purchasing procedures. All computers in the com-pany are networked to a centralized accounting system sothat each terminal has full access to a common database.The inventory control clerk periodically checks in-ventory levels from a computer terminal to identifyitems that need to be ordered. Once the clerk feels in-ventory is too low, he chooses a supplier and creates apurchase order from the terminal by adding a record tothe purchase order file. The clerk prints a hard copy ofthe purchase order and mails it to the vendor. An elec-tronic notification is also sent to accounts payable andreceiving, giving the clerks of each department accessto the purchase order from their respective terminals.When the raw materials arrive at the unloading dock,a receiving clerk prints a copy of the purchase orderfrom his terminal and reconciles it to the packing slip.The clerk then creates a receiving report on a computersystem.…arrow_forwardSYSTEM DOCUMENTATION- REVENUE CYCLE (MANUALAND COMPUTER PROCESSES)The following describes the revenue cycle procedures for a hypotheticalcompany. The sales department clerk receives hard-copy customer orders andmanually prepares a six-part hard-copy sales order. Copies of the salesorder are distributed to various departments as follows: Copies 1, 2, and3 go to the shipping department, and Copies 4, 5, and 6 are sent to thebilling department where they are temporarily filed by the billing clerk. Upon receipt of the sales order copies, the shipping clerk picks the goodsfrom the warehouse shelves and ships them to the customer. Theclerk sends Copy 1 of the sales order along with the goods to thecustomer. Copy 2 is sent to the billing department, and Copy 3 is filed inthe shipping department. When the billing clerk receives Copy 2 from the warehouse, she pulls theother copies from the temporary file and completes the documents byadding prices, taxes, and freight charges. Then, using the…arrow_forward12-12. Draw a document flowchart to depict each of the following situations.a. An individual from the marketing departmentof a wholesale company prepares fivecopies of a sales invoice, and each copy issent to a different department.b. The individual invoices from credit salesmust temporarily be stored until they canbe matched against customer payments ata later date.c. A batch control tape is prepared along witha set of transactions to ensure completenessof the data.d. The source document data found onemployee application forms are used asinput to create new employee records ona computer master file.e. Delinquent credit customers are sent asmany as four different inquiry letters beforetheir accounts are turned over to a collectionagency.f. Physical goods are shipped back to the supplierif they are found to be damaged uponarrival at the receiving warehouse.g. The data found on employee time cards arekeyed onto a hard disk before they are processedby a computer.h. The data found on…arrow_forward
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