Question 1 (11 marks)
ABC Limited operates its business as one of the leading clothing wholesalers in the region and sells its clothes to retailers. You recently joined this wholesaler for a short project where your primary responsibility is to analyse their transaction process system critically. For this purpose, you are provided with the description of various business activities of the following four departments (also see Figure 1.1 on the next page): (1) Sales Department, (2) Accounting Department, (3) Warehouse/Shipping, and (4) Mailroom.
The sales department of ABC Limited has a part-time sales clerk, Miss Emma, who works on the commissions. Miss Emma encourages its customers to forward the orders in any form, including mail, e-mail or fax (recall our discussion on the revenue cycle during the interactive tutorial for week 4). Miss Emma approves the credit sales and calculates commission and discounts. Then, she records the sales in the sales journal from the PC in the sales department. After entering these records, Miss Emma prepares three documents (a sales order, a customer invoice, and a packing slip) and forwards these documents to the accounting department for further processing.
Miss Simone works in the accounting department, and she is the best friend of Miss Emma. Miss Simone receives these documents and updates the account receivable subsidiary ledger. Miss Simone then prepares and forward the invoice to the customer. You further analyse that Miss Simone forwards the sales order and packing slip to the warehouse/shipping department. The warehouse/shipping clerk arranges the inventory and sends the inventory along with the packing slip to the carrier for shipment to the customer. Finally, the warehouse/shipping clerk updates the inventory subsidiary ledger and files the sales order in the department.
Further analysis of the transaction process system of ABC Limited reveals that cash receipts from customers go to the mailroom, which has one supervisor overseeing ten employees performing similar tasks:
• A clerk opens the envelope containing the customer check and remittance advice.
• Inspects the check for completeness.
• Reconciles check with the remittance advice.
• Sends the remittance advice and check to the accounting department.
Figure 1.1.
Miss Simone then performs the following four tasks:
• reviews the remittance advice and the checks,
• updates the AR subsidiary ledger, and
• records the cash receipt in the cash receipts journal.
At the end of the day, Miss Simone updates the AR control, cash, and sales accounts in the general ledger to reflect the day’s sales and cash receipts.
Required:
a) Identify the internal control weaknesses in the transaction processing system of ABC Limited. [6 Marks. Word Limit: Up to 300 words]
b) Describe the risk associated with the internal control weaknesses identified in (a) above. [5 Marks. Word Limit: Up to 200 words]
ANSWER: ** Answer box will enlarge as you type
Question 2 (11 marks)
Part (a). You are working as an accountant in XYZ Limited (a mid-size accounting firm with a reasonable range of clients). Currently, you ask the employees to provide the relevant information to initiate the planning phase of the audit. Further, you plan to draw the data from analytical reviews and substantive testing from the operational database. However, the management of your client wants you to draw the data from the data warehouse. The management argues that the data extracted from the operational database will disrupt the operations. Further, the management points out that operational data are copied weekly into the data warehouse, and all data you need are contained there.
Required: We have discussed the operational database and data warehouse under the topic -ERP Core Applications- in the Week 10 Interactive Tutorial. Based on this discussion, outline your response to the management’s proposal and mention any concerns you might have. [4 Marks. Word Limit: Up to 200 words]
Part (b). Production planning and control, work centres, inventory control, and cost accounting play an integral role in the conversion cycle. We have discussed the business activities performed in these departments in our lectures and interactive tutorials. Figure 2.1 illustrates some of these business activities.
Required: Discuss the control problems and the possible dangers in the business activities of these departments. Further, recommend the corrective procedures to overcome these dangers. [7 Marks. Word Limit: Up to 300 words]
ANSWER:
Question 3 (7 marks)
Mr Robert is working as the head of the accounting department in HARDA Limited for a decade. HARDA Limited wants to move from the legacy system to a new accounting information system. For this purpose, Mr Robert contacted a system professional, Paul Walker. During the initial meeting, Paul reveals that our system analysis team will first examine the old system, such as reviewing key documents and observing the workers perform their tasks. This initial analysis will enable us to determine which aspects are working well and which should be preserved. Robert disagrees with his opinion. Robert indicates that we have been through these types of projects before, and what always ends up happening is that we do not get the new system we are promised. We get a modified version of the old system.
Paul Walker is still strict with his opinion and says that I can guarantee you that this will not happen again. As a system analyst, I need a proper understanding of the old system. What is working well and what is not. Despite these strong arguments, Robert says that I would feel much more comfortable if we first started with a list of our requirements. We should spend some time up-front determining exactly what we want the system to do for my department. Then your systems people can come in and determine what portions to salvage if you wish. Just don’t constrain us to the old system!
Required: Whose position you sympathise with the most. And what method would you propose they take? Why? [7 Marks. Word Limit: Up to 300 words]
ANSWER:
Question 4 (7 marks)
Figure 4.1 below presents the payroll procedures of AAA Limited. We discussed various aspects of such payroll procedures. In the light of that discussion, identify the potential frauds possible in the payroll system of AAA Limited. Also, discuss the control techniques to avoid these frauds. [7 Marks. Word Limit: Up to 200 words]
ANSWER:
Question 5 (7 marks)
After finishing your Bachelor of Accounting, you joined a multinational enterprise in 2007. During the last thirteen years in a multinational enterprise, you have performed various roles, including:
• Evaluating the systems development methodologies and the role of accountants in system development projects, and
• Appraising the risks inherent in the Enterprise Resource Planning and analysing the role of ethics and the various internal control processes that need to be in place.
Recently, you joined a mid-size company for a senior role as a chief information officer. You are excited to perform this senior role. Mark (the head of your organisation) has decided to implement an Enterprise Resource Planning (ERP) system. Recently, Mark has met with a consulting ERP firm based on a friend’s recommendation at his club. During a recent meeting, Mark introduced the chief consultant, charming, personable, and seemed very knowledgeable. The CEO’s first instinct was to sign a contract with the consultant, but he decided to hold off until he had received your input.
Required: Mark wants your opinion on this issue. In particular, he asked you to write a memo presenting the issues and the risks associated with consultants. Your discussion should be based on the relevant, interactive tutorial. Further, outline a set of procedures that could be used as a guide in selecting a consultant. [7 Marks. Word Limit: Up to 200 words]
ANSWER:
Question 6 (7 marks)
Part (a). One of the essential steps of the system development life cycle is preparing feasibility studies, including technical, economic, legal, operational and schedules feasibility. We have discussed these feasibilities in the interactive tutorials in details. Discuss these feasibilities briefly. And elaborate cost-benefit analysis under economic feasibility. [4 Marks. Word Limit: Up to 200 words]
Part (b). The system experts perform the design and implementation phases of the system development life cycle. However, the accountant’s role in these phases cannot be ignored. Comment on the statement. [3 Marks. Word Limit: Up to 150 words]
ANSWER:
END OF TUTORIAL ASSIGNMENT
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