Accounting Information Systems
10th Edition
ISBN: 9781337619202
Author: Hall, James A.
Publisher: Cengage Learning,
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Question
Chapter 4, Problem 5P
a.
To determine
Explain uncontrolled risks associated with the given accounting system.
b.
To determine
Explain the internal control weakness of each risk associated with this system.
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Following describes the credit sales procedures for clothing wholesaler that sells name-brand clothing to department stores and boutique dress shops. The company sells to both one-time and recurring customers. A flowchart of the system is provided in the figure labeled Problem 5: Internal Control. Customer orders are received by fax and e-mail in the sales department. The sales clerk, who works on commission, approves the credit sale, calculates com- missions and discounts, and records the sale in the sales journal from the PC in the sales department. The clerk then prepares a sales order, a customer invoice, and a packing slip, which are sent to the accounting department for processing. The accounting clerk updates the AR subsidiary ledger and sends an invoice to the customer. The clerk then forwards the sales order and packing slip to the warehouse- shipping department. The warehouse-shipping clerk picks the items from inventory and sends them and the packing slip to the carrier for…
RISKS AND INTERNAL CONTROLSFollowing describes the credit sales procedures for clothing wholesalerthat sells name-brand clothing to department stores and boutique dressshops. The company sells to both one-time and recurring customers. Aflowchart of the system is provided in the figure labeled Problem 5:Internal Control.Customer orders are received by fax and e-mail in the sales department.The sales clerk, who works on commission, approves the credit sale,calculates commissions and discounts, and records the sale in the salesjournal from the PC in the sales department. The clerk then prepares asales order, a customer invoice, and a packing slip, which are sent to theaccounting department for processing. The accounting clerk updatesthe AR subsidiary ledger and sends an invoice to the customer. The clerkthen forwards the sales order and packing slip to the warehouse-shipping department. The warehouse-shipping clerk picks the itemsfrom inventory and sends them and the packing slip to the…
RISK 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…
Chapter 4 Solutions
Accounting Information Systems
Ch. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - What function does the receiving department serve...Ch. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Distinguish between an edit run, a sort run, and...
Ch. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - In a manual system, after which event in the sales...Ch. 4 - Prob. 18RQCh. 4 - What document initiates the billing process?Ch. 4 - Prob. 20RQCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - What financial statement misrepresentations may...Ch. 4 - Prob. 10DQCh. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - Prob. 13DQCh. 4 - Prob. 14DQCh. 4 - Prob. 15DQCh. 4 - How is EDI more than technology? What unique...Ch. 4 - Prob. 17DQCh. 4 - Prob. 1MCQCh. 4 - Prob. 2MCQCh. 4 - Prob. 3MCQCh. 4 - Prob. 4MCQCh. 4 - Prob. 5MCQCh. 4 - Prob. 6MCQCh. 4 - Prob. 7MCQCh. 4 - Prob. 8MCQCh. 4 - Prob. 9MCQCh. 4 - Prob. 10MCQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Prob. 12PCh. 4 - In 1989, Robert Smith opened a small fruit and...Ch. 4 - Posavek is a wholesale supplier of building...Ch. 4 - Prob. 3ICCCh. 4 - (Prepared by Will Richens and Michael Catchpole,...Ch. 4 - Prob. 6ICC
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- which, if any of the following situations represents improper segregation of functions? Explain your answer. a. the billing department prepares the customers' invoices and records the sale in the sales journal b. The mailroom clerk opens a cash receipt envelopes from customers and also prepared the remittance risk c. Accounting clerk receives journal vouchers from various departments and also posts to the GL accounts d. The sales department approves sales credit memos as the result of product returns and forwards these to the AR department, which adjusts the customer accounts to reflect the return.arrow_forwardFashion Forward, a clothing distributor, wants to ensure it has strong information system controls over the purchasing and payables cycle. Which of the following should be implemented? A. The same person should do the buying and the receiving; however, that person should not have access to the accounting records to ensure appropriate segregation of duties. B. Only accept requisitions against the account code entered by all employees who have identified that goods are needed. ☐ C. There should be a periodic check of invoices where no goods have been received. D. The computer should check the requisition against the inventory master file to confirm that the re-order point has been reached. E. Orders placed for supplies not on the approved list should be accepted if they are needed. F. Receiving should enter the details of goods received on the computer against the order. G. Details of invoices should be entered into the computer on receipt, and the computer will match the invoice with…arrow_forwardEach of the below describes a procedure consistent with a strong system of internal control except… Question 7 options: The customer order department determines when a sale has occurred and should be recorded. The accounts payable department agrees purchase requisitions, purchase orders, receiving reports, and invoices prior to payment. Quantities ordered are excluded from the receiving department copy of a purchase order so receiving personnel count and inspect merchandise received. The use of remittance advices for customers' payments on accounts receivable received in the mail.arrow_forward
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- Which of the following are examples of preventive controls? Select all that apply. O account coding on purchase orders is checked by the computer using a table of valid account numbers computerized accounting system will not allow a sale to be processed if a customer has exceeded its credit limit O quarterly review of credit balances in accounts receivable for reasonableness O sales manager reviews daily shipments, total sales, and sales per unit shipped O sales invoices are priced automatically using a master pricing filearrow_forwardWhen the store manager receives a requisition note, he issues three copies of purchase order. Two copies of these orders are sent to the vendor and one copy remains in the stores file. When the goods are received, the store manager matches the purchase order with the invoice and forwards them to accounts payable department for payment of dues. Which of the following statement best describes the internal control over the purchasing process? Inadequate control over accounts payable. Inadequate segregation of duties. Inadequate segregation of duties. Adequate internal control exists.arrow_forwardWhich, if any,of the followingsituations represent improper segregationof functions? Explain your answer. a. The billing deparment prepares the customers' invoices and records the sale in the sales journal. b. Mail room clerk opens cash receipts envelopes from customers and also prepares the remittance list. c. Accounting clerk receives journal vouchers from various departments and also posts to the GL accounts. d. The sales department approves sales credit memos as the result of product returns and forwards these to the AR department, which adjusts the customer accounts to reflect the return.arrow_forward
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