AIS James Hall 10th edition chapter 5. What is the answer for internal control cases number 5 the Generators R US (centralized system with distributed terminals)? b. Create ac. Analyze the physical internal contrôl weaknessesin the system.d. Describe the risks associated with these controlted inchasingweaknesses.e. (Optional) Prepare a system flowchart of a rede-entoryntoryplen-Onesigned computer-based system that resolves thecontrol weaknesses that you identified. Explainyour solution.E thethe5. GENERATORS R US (CENTRALIZEDSYSTEM WITH DISTRIBUTEDuseTERMINALS)omlesGenerators R Us (GRU) is a leading manufacturerhe of partible electric generators used for emergency CHAPTER SThe Expenditure Cycle Part I Purchases and Cash Disbursements Procedurespower supply in both civil and private disaster situa-tions. GRU's primary customers are disaster recov-ery companies that assist home owners followingflooding and other natural disasters. GRU also247sent to the vendor, and a copy is sent to cash disbur-sements, where it is filed. Next, the system adds arecord to the check register file and removes the lia-bility in the AP subsidiary ledger. Finally, the systemautomatically updates the GL accounts.building contractors, municipalities, andrental companies. The company purchases its rawmaterials including bearings, copper wire, and insu-lating materials inventory directly from the manufac-tures. GRU's headquarters and manufacturingfacilities are in Dallas, Texas, where they employ,125 manufacturing and clerical staff.GRU uses a centralized computer system withdistributed terminals in its various departments.Recently they have experienced operational pro-blems with their system and GRU management hashired your auditing firm to assess its operations andinternal control procedures.Requireda. Create a data flow diagram of the current system.b. Create a system flowchart of the existing system.C. Analyze the physical internal control weaknessesin the system.d. Describe the IT controls that should be in place inthis system.e. (Optional) Prepare a system flowchart of a rede-signed computer-based system that resolves thecontrol weaknesses that you identified. Explainyour solution.Purchasing SystemWhen an inventory item falls to the reorder point, apurchase requisition is automatically created andprinted on the terminal in the purchasing depart-ment. The clerk in the department selects suppliersand prepares a purchase order. A copy of the PO issent to the vendor, and a copy is sent to the receivingdepartment. Then, the clerk adds a record to theopen/closed purchase order file through an updateprogram in the data processing department.When the receiving clerk receives the inventories,he reconciles the goods with the packing slip and thepurchase order. After the reconciliation, the receiv- ture's expenditure cycle procedures.ing clerk prepares a hard-copy receiving reportrecording the quantity and quality of the goods Purchases Systemreceived. A copy of the receiving report accompaniesthe goods to the warehouse, and a copy is filed in thereceiving department. Using the department termi-nal, the receiving clerk adds a record to the digitalreceiving report file. The system then automatically vendor file and prepares a digital purchase order,closes the purchase order. Upon receiving the inven-tories, the warehouse clerk updates the inventorysubsidiary ledger through the terminal in thewarehouse.6. OUTDOOR ADVENTURE: WHITEWATER AND CAMPING SUPPLIES(NETWORKED COMPUTER SYSTEMAND MANUAL PROCEDURES)Outdoor Adventure is a Montana-based wholesalerof rafting and camping equipment that serves out-door sports camping retailers throughout the north-west. You have been hired by Outdoor Adventure toevaluate its processes, risks, and internal controls.The following paragraphs describe Outdoor Adven-The process begins when the purchasing clerk checksthe inventory subsidiary ledger on his computer ter-minal each morning. When an item is deemed to betoo low, the clerk selects a vendor from the validThe clerk prints two hard copies: one copy is sentto the vendor, and the other is filed in the depart-ment. Digital purchase order record is added to thePO File.When the supplier's invoice arrives, the AP clerkadds a record to the supplier invoice file, which trig-gers the system to automatically set up a liability inthe AP subsidiary ledger based on the financial infor-mation contained in the invoice. The system thenautomatically updates all affected GL accounts.When the goods arrive in the receiving depart-ment, the receiving clerk inspects them and recon-ciles the items against the information in the digita.PO and the packing slip. The clerk then manuallprepares two hard copies of the receiving reporOne of these accompanies the goods to the inventonwarehouse, where the clerk shelves the goods anupdates the inventory subsidiary ledger from his tominal. The clerk then files the receiving report in tCash Disbursements SystemCach day, the system scans the AP ledger for itemsdue to be paid and prints the checks. The check is department. The other copy of the receiving repor

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