Concept explainers
DISASTER RECOVERY PLAN
Hexagon is an online retailer of exotic foods including spices from around the world, canned sauces, and prepackaged breads such as tortillas and naan. The company does 100 percent of its business over the Internet to consumers and through private networks with retail trading partners. Recently, Hexagon moved its sales and business headquarters functions into a warehouse on the outskirts of San Francisco. Prior to the move, the company engaged the services of an architect to redesign the facility to be modern yet in keeping with the original character of the building. While remodeling the warehouse, the architects retained the wooden-shingled exterior and the exposed wooden beams throughout the interior. The data processing center, which contained the servers and networked terminals, was situated in a large open area with high ceilings and skylights. The center was made accessible to the rest of the staff to be consistent with the firm’s philosophy of removing barriers and encouraging a team approach to problem solving. Before occupying the new facility, city inspectors declared the building to be compliant with all relevant building codes.
In a recent compliance audit, Hexagon’s auditors advised the company’s management to develop a disaster recovery plan. Toward this end, the company entered into a mutual aid agreement with several other firms in the area that had similar technology systems. These firms all agreed verbally to provide emergency assistance to each other in the event of disasters or emergencies. In addition, Hexagon implemented a data backup system in which all files are copied daily to tapes and disks and each week the backup storage devices are taken to an offsite facility where they are secured.
The operator’s manual with instructions on how to restore the system is stored in the main data processing area along with a list of names and phone numbers of key IT professionals to contact in case of an emergency.
Required
- a. Describe the internal control weaknesses present at Hexagon.
- b. List the components that should be included in a disaster recovery plan for a company like Hexagon.
- c. What factors, other than those included in the plan itself, should a company consider when formulating a disaster recovery plan?
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Chapter 14 Solutions
Accounting Information Systems
- Posavek is a wholesale supplier of building supplies building contractors, hardware stores, and home-improvement centers in the Boston metropolitan area. Over the years, Posavek has expanded its operations to serve customers across the nation and now employs over 200 people as technical representatives, buyers, warehouse workers, and sales and office staff. Most recently, Posavek has experienced fierce competition from the large online discount stores. In addition, the company is suffering from operational inefficiencies related to its archaic information system. Posavek revenue cycle procedures are described in the following paragraphs. Revenue Cycle Posaveks sales department representatives receive orders via traditional mail, e-mail, telephone, and the occasional walk-in customer. Because Posavek is a wholesaler, the vast majority of its business is conducted on a credit basis. The process begins in the sales department, where the sales clerk enters the customers order into the centralized computer sales order system. The computer and file server are housed in Posaveks small data processing department. If the customer has done business with Posavek in the past, his or her data are already on file. If the customer is a first-time buyer, however, the clerk creates a new record in the customer account file. The system then creates a record of the transaction in the open sales order file. When the order is entered, an electronic copy of it is sent to the customers e-mail address as confirmation. A clerk in the warehouse department periodically reviews the open sales order file from a terminal and prints two copies of a stock release document for each new sale, which he uses to pick the items sold from the shelves. The warehouse clerk sends one copy of the stock release to the sales department and the second copy, along with the goods, to the shipping department. The warehouse clerk then updates the inventory subsidiary file to reflect the items and quantities shipped. Upon receipt of the stock release document, the sales clerk accesses the open sales order file from a terminal, closes the sales order, and files the stock release document in the sales department. The sales order system automatically posts these transactions to the sales, inventory control, and cost-of-goods-sold accounts in the general ledger file. Upon receipt of the goods and the stock release, the shipping department clerk prepares the goods for shipment to the customer. The clerk prepares three copies of the bill of lading. Two of these go with the goods to the carrier and the third, along with the stock release document, is filed in the shipping department. The billing department clerk reviews the closed sales orders from a terminal and prepares two copies of the sales invoice. One copy is mailed to the customer, and the other is filed in the billing department. The clerk then creates a new record in the accounts receivable subsidiary file. The sales order system automatically updates the accounts receivable control account in the general ledger file. CASH RECEIPTS PROCEDURES Mail room clerks open customer cash receipts, reviews the check and remittance advices for completeness, and prepares two copies of a remittance list. One copy is sent with the checks to the cash receipts department. The second copy of the remittance advices are sent to the billing department. When the cash receipts clerk receives the checks and remittance list, he verifies the checks received against those on the remittance list and signs the checks For Deposit Only. Once the checks are endorsed, he records the receipts in the cash receipts journal from his terminal. The clerk then fills out a deposit slip and deposits the checks in the bank. Upon receipt of the remittances, the billing department clerk records the amounts in the accounts receivable subsidiary ledger from the department terminal. The system automatically updates the AR control account in the general ledger Posavek has hired your public accounting firm to review its sales order procedures for internal control compliance and to make recommendations for changes. Required a. Create a data flow diagram of the current system. b. Create a system flowchart of the existing system. c. Analyze the physical internal control weaknesses in the system. d. (Optional) Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses that you identified. Explain your solution.arrow_forwardBasuras Waste Disposal Company has a long-term contract with several large cities to collect garbage and trash from residential customers. To facilitate the collection, Basuras places a large plastic container with each household. Because of wear and tear, growth, and other factors, Basuras places about 200,000 new containers each year (about 20% of the total households). Several years ago, Basuras decided to manufacture its own containers as a cost-saving measure. A strategically located plant involved in this type of manufacturing was acquired. To help ensure cost efficiency, a standard cost system was installed in the plant. The following standards have been established for the products variable inputs: During the first week in January, Basuras had the following actual results: The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in January. Also, a new manufacturing process was implemented on a trial basis. The new process required a slightly higher level of skilled labor. The higher- quality material has no effect on labor utilization. However, the new manufacturing process was expected to reduce materials usage by 0.25 pound per container. Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances. Assume that the 0.25 pound per container reduction of materials occurred as expected and that the remaining effects are all attributable to the higher-quality material. Would you recommend that the purchasing agent continue to buy this quality, or should the usual quality be purchased? Assume that the quality of the end product is not affected significantly. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances. Assuming that the labor variances are attributable to the new manufacturing process, should it be continued or discontinued? In answering, consider the new processs materials reduction effect as well. Explain. 3. CONCEPTUAL CONNECTION Refer to Requirement 2. Suppose that the industrial engineer argued that the new process should not be evaluated after only one week. His reasoning was that it would take at least a week for the workers to become efficient with the new approach. Suppose that the production is the same the second week and that the actual labor hours were 9,000 and the labor cost was 99,000. Should the new process be adopted? Assume the variances are attributable to the new process. Assuming production of 6,000 units per week, what would be the projected annual savings? (Include the materials reduction effect.)arrow_forwardThe Cloud Burst Sprinkler Company of Benicia, California has been manufacturing and selling a water efficient sprinkler exclusively to Home Depot for the last two years. Although there is not a binding contract that gives Home Depot exclusive rights to buy and stock the sprinkler in their network of locations, Cloud Burst has placed a great deal of importance on keeping Home Depot locations across the country and Canada fully stocked with their water efficient sprinkler. ACE Hardware has approached Cloudburst indicating they would like to stock the water efficient sprinkler in their 4,192 stores across the United States. The initial proposal submitted by ACE is to purchase 50,304 sprinklers which will result in a dozen sprinklers stocked in every store. The proposal received from ACE will NOT affect fixed costs, however, ACE has requested a special onetime quantity wholesale discount price of $5.80 per sprinkler For the first 6 months of 2022, Cloud Burst Sprinkler Company achieved the…arrow_forward
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