Accounting Information Systems

11th Edition
Ulric J. Gelinas + 3 others
ISBN: 9781337552127



Accounting Information Systems

11th Edition
Ulric J. Gelinas + 3 others
ISBN: 9781337552127
Textbook Problem

The following is a list of 12 control plans from this chapter or from Chapter 9 and Chapter 10. These are followed by a list of 10 system failures that have control implications. Match the 10 system failures with a control plan that would best prevent the system failure from occurring. Also, give a brief (one- to two-sentence) explanation of your choice. A letter should be used only once, with two letters left over.

Control Plans

  1. A. Review shipped but not billed sales orders
  2. B. Confirm customer balances regularly
  3. C. Enter shipping notice dose to location where order is shipped
  4. D. Check for authorized prices, terms, freight, and discounts
  5. E. Hash totals (e.g., of customer ID numbers)
  6. F. Computer agreement of batch totals
  7. G. Key verification
  8. H. Compare input sales return notification to AR master data
  9. I. Immediately endorse incoming checks
  10. J. One-for-one checking of checks and RAs
  11. K. Immediately separate checks and RAs
  12. L. Reconcile bank account regularly

System Failures

  1. 1. After goods are delivered to the common carrier, the shipping department at Stanley, Inc. prepares a three-part shipping notice. Copy 2 of the notice is sent to billing to initiate the billing process. Many shipping notices have either been lost in transit or been delayed in reaching the billing section.
  2. 2. Bar-Jacob Company was given a refund for a sales return even though the return was received and processed months after the sales terms allowed such a return.
  3. 3. Because the mailroom clerks at Holdington Corp. do not take batch totals of incoming customer checks, the cashier has misappropriated several thousand dollars over the years by depositing company checks to his personal bank account.
  4. 4. Nichol, Inc. uses periodic processing for entering sales invoice inputs and updating customer accounts. Although it uses certain batch total procedures, Nichol has experienced a number of instances of recording sales invoices to incorrect customer accounts.
  5. 5. Grant Company customers send in their payments with an RA on which they write the amount being paid. These amounts often do not agree with the amount of the payment. As a result, the cash and AR balances at Grant Company are not correct.
  6. 6. The balances due from customers at Wright Company are months overdue.
  7. 7. At Jefferson, Inc., shipping sends shipping notices to the data entry group in data processing, where they are keyed. During the past month, an inexperienced data entry clerk made several errors in keying the shipping notices. The errors were discovered when customers complained about inaccurate invoices.
  8. 8. Sales at Macon Corp. have declined considerably compared to those of the preceding year. In an effort to improve the financial statements, the vice president of finance obtained a supply of blank shipping notices on which she fabricated 100 fictitious shipments. She submitted the fictitious documents to the billing department for billing.
  9. 9. The mailroom at Gardener Company forwards checks and RAs to the accounts receivable department. A clerk checks the RAs against open invoices, as reflected on the accounts receivable master data. It is not uncommon for the clerk to note discrepancies, in which ease the customer is contacted in an effort to reconcile the differences. After all the discrepancies have been investigated and cleared, the accounts receivable clerk releases the checks to the cashier for deposit.
  10. 10. Clerks in the hilling department at Canterbury Enterprises, Inc. prepare sales invoices from a copy of the packing slip received from the shipping department. Recently, the company has experienced a rash of customer complaints that the customers have been hilled for freight charges, despite the fact that the freight terms were FOB destination.

Summary Introduction

To match: The system failures with the control plans.

B/AR/CR process:

It is an accounting process with an interacting structure of different process supporting the decision-making activities of the financial managers.


The system failures with the control plans:


Correct answer: (A)

Review shipped but not billed sales orders.

The open sales orders that are shipped but not billed must be reviewed to ensure that the shipments are billed within the stipulated time. The old sales order must also be reviewed to determine whether the order has been shipped or the shipment as not been recorded.


Correct answer: (H)

Compare input sales return notification to AR master data.

The terms of the accounts receivable master data is checked to know if they are open or already paid to know if the terms allow a return for the credit.


Correct answer: (I)

Immediately endorse incoming checks.

The cashier could not easily divert the checks if they are restrictively endorsed.


Correct answer: (E)

Hash totals (e.g., of customer ID numbers).

The comparison of input to the output hash totals of the customer ID will identify if there are any invoices where the customer ID are changed during the processing stage.


Correct answer: (J)

One-for-one checking of checks and RAs.

It will aid in determining that the quantity on the RA agrees with the check and the expenses will be documented accurately...

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