Sales Accounting System Risks

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St. James Clothiers Evaluation of Manual and IT-Based Sales Accounting System Risks Copy Right: Anthony Butka Ralph Avallone Hong-Ming Yen Executive Summary Case Synopsis We meet Sally St. James of St. James Clothiers who has a retail clothing store in Tennesse. Sally has decided to abandon her manual sales entry system and convert to a more sophisticated IT-based application. As the audit engagement team we have been asked to review narratives of former years and then draft a narrative for the new system. We will address the weaknesses of having a manual based sales entry system. We will discuss how switching to an IT-based will take care of some of those weaknesses. We will then talk about some of the new risks that Sally St.…show more content…
Managers or employees may still inaccurately process data. This may happen especially when installing the new IT technology as nobody will have any prior experience with it. The mistake can be discovered after an accounting cycle or even longer. b. IT-based sales systems still pose a risk of manager fraud. People who can figure out a way to access the store manager’s PC can easily change the data, which includes the recording of unauthorized or nonexistent transactions or inaccurate recordings of transactions. c. Where multiple users may access a common database, a lack of control at a single user entry point may compromise the security of the entire database. d. If an IT personnel or user has access to that manager’s PC, he or she may change the computer program to achieve their assigned duties or personal goal. e. Reliance on IT-based sales system can cause misstatements if the appropriate personnel forgets to make any necessary changes to the system. For instant, what if the manager forgets to adjust any discount prices back to there normal selling price? This can hurt profits and since the sales clerks are no longer looking at advertising coupons, they most likely won’t notice that the price should be higher. f. Even computerized sales system can make a misstatement when there is inappropriate manual intervention. For example, an employee may key in promotion code and give out discount to someone who is not qualified. g. The most dangerous part of having

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