Identify Computer Control Weaknesses. Ajax Inc., an audit client, recently installed anew accounting information system to process its shipping, billing, and accounts receivable records more efficiently. During interim work, an assistant completed the review of theaccounting information system and the internal controls. The assistant determined the following information concerning the new accounting information system and the processingand control of shipping notices and customer invoices.Each major computerized function (i.e., shipping, billing, accounts receivable) is permanently assigned to a specific computer operator who is responsible for making program changes,running the program, and reconciling the computer log. Responsibility for custody and controlover the various databases and system documentation is randomly rotated among the computer operators on a monthly basis to prevent any one person from access to the database anddocumentation. Each computer programmer and computer operator has access to the computerroom via a magnetic card and a digital code that is different for each card. The systems analystand the supervisor of computer operators do not have access to the computer room.The computer system documentation consists of the following items: program lists, errorlists, logs, and database dictionaries. To increase efficiency, control totals (both batch totalsand hash totals) and processing controls are not used in the system.Ajax ships its products directly from two warehouses that forward shipping notices togeneral accounting. There, the billing clerk enters the price of the item and accounts for thenumerical sequence of the shipping notices. The billing clerk also prepares daily summaries ofthe units shipped and the sales amounts. Shipping notices and summaries that are forwarded tothe computer department for processing the computer output consist of the following:∙ A three-copy invoice that is forwarded to the billing clerk.∙ A daily sales register showing the aggregate totals of units shipped and sales amountsthat the computer operator compares to the summaries. The billing clerk mails two copies of each invoice to the customer and retains the thirdcopy in an open invoice file that serves as a detail accounts receivable record.Required:a. Prepare a list of weaknesses in internal control (manual and computerized) and describeone or more ways to address each.b. Suggest how Ajax’s automated processing over shipping and billing could be improvedthrough the use of remote terminals to enter shipping notices. Describe appropriate ITcontrols for such an online data entry system
Identify Computer Control Weaknesses. Ajax Inc., an audit client, recently installed a
new
accounting information system and the internal controls. The assistant determined the following information concerning the new accounting information system and the processing
and control of shipping notices and customer invoices.
Each major computerized function (i.e., shipping, billing, accounts receivable) is permanently assigned to a specific computer operator who is responsible for making program changes,
running the program, and reconciling the computer log. Responsibility for custody and control
over the various databases and system documentation is randomly rotated among the computer operators on a monthly basis to prevent any one person from access to the database and
documentation. Each computer programmer and computer operator has access to the computer
room via a magnetic card and a digital code that is different for each card. The systems analyst
and the supervisor of computer operators do not have access to the computer room.
The computer system documentation consists of the following items: program lists, error
lists, logs, and database dictionaries. To increase efficiency, control totals (both batch totals
and hash totals) and processing controls are not used in the system.
Ajax ships its products directly from two warehouses that forward shipping notices to
general accounting. There, the billing clerk enters the price of the item and accounts for the
numerical sequence of the shipping notices. The billing clerk also prepares daily summaries of
the units shipped and the sales amounts. Shipping notices and summaries that are forwarded to
the computer department for processing the computer output consist of the following:
∙ A three-copy invoice that is forwarded to the billing clerk.
∙ A daily sales register showing the aggregate totals of units shipped and sales amounts
that the computer operator compares to the summaries.
The billing clerk mails two copies of each invoice to the customer and retains the third
copy in an open invoice file that serves as a detail accounts receivable record.
Required:
a. Prepare a list of weaknesses in internal control (manual and computerized) and describe
one or more ways to address each.
b. Suggest how Ajax’s automated processing over shipping and billing could be improved
through the use of remote terminals to enter shipping notices. Describe appropriate IT
controls for such an online data entry system
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