Denis Frederick owns Never Leak, Inc., which is a small plumbing supply company that employs 16 workmen who perform plumbing tasks and 3 office staff. One of the office staff is John Higgins who has been with the company since it opened its doors. During that time, he has earned the trust of the owner and has proven to be a diligent employee who often works late, occasionally comes in on weekend for no additional pay, and hasn’t taken a substantial vacation in over 10 years. Instead, he staggers his vacation days throughout the year to avoid the need for a replacement and ensuring that none of the other office staff is burdened with his work. John’s primary tasks include: Responsible for POS cash and credit sales Bills the customers who purchase on credit Opens the mail and posts to AR records, and Prepares the daily cash deposits for the business. Another office worker, Larry Jones, handles ordering inventory and supplies from vendors, stocking, shipping merchandise, updating inventory records, and writing checks to vendors in payment of purchases. The third office staff member, Margaret Lilly, performs the payroll (writing paychecks and recording payroll payments) and general ledger functions. Required 1) Discuss the risks inherent in the scenario. 2) Make control recommendations to mitigate the risks under the constraint that no additional employees can be hired.

BuyFind

Accounting Information Systems

10th Edition
Hall + 1 other
Publisher: Cengage Learning,
ISBN: 9781337619202
BuyFind

Accounting Information Systems

10th Edition
Hall + 1 other
Publisher: Cengage Learning,
ISBN: 9781337619202

Solutions

Chapter
Section
Chapter 4, Problem 8P
Textbook Problem

Denis Frederick owns Never Leak, Inc., which is a small plumbing supply company that employs 16 workmen who perform plumbing tasks and 3 office staff. One of the office staff is John Higgins who has been with the company since it opened its doors. During that time, he has earned the trust of the owner and has proven to be a diligent employee who often works late, occasionally comes in on weekend for no additional pay, and hasn’t taken a substantial vacation in over 10 years. Instead, he staggers his vacation days throughout the year to avoid the need for a replacement and ensuring that none of the other office staff is burdened with his work.

John’s primary tasks include:

  • Responsible for POS cash and credit sales
  • Bills the customers who purchase on credit
  • Opens the mail and posts to AR records, and
  • Prepares the daily cash deposits for the business.

Another office worker, Larry Jones, handles ordering inventory and supplies from vendors, stocking, shipping merchandise, updating inventory records, and writing checks to vendors in payment of purchases.

The third office staff member, Margaret Lilly, performs the payroll (writing paychecks and recording payroll payments) and general ledger functions.

Required

  1. 1) Discuss the risks inherent in the scenario.
  2. 2) Make control recommendations to mitigate the risks under the constraint that no additional employees can be hired.

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Chapter 4 Solutions

Accounting Information Systems
Ch. 4 - What are the key features of a POS system?Ch. 4 - How is a credit check in the advanced technology...Ch. 4 - What is multilevel security?Ch. 4 - Why does billing receive a copy of the sales order...Ch. 4 - Why was EDI devised?Ch. 4 - What assets are at greatest risk in a POS system?Ch. 4 - In a manual system, after which event in the sales...Ch. 4 - What is a bill of lading?Ch. 4 - What document initiates the billing process?Ch. 4 - Where in the cash receipts process does...Ch. 4 - Why do firms have separate departments for...Ch. 4 - Distinguish between the sales order, billing, and...Ch. 4 - Explain the purpose of having mail room...Ch. 4 - Explain how segregation of duties is accomplished...Ch. 4 - How could an employee embezzle funds by issuing an...Ch. 4 - What task can the AR department engage in to...Ch. 4 - Why is access control over revenue cycle documents...Ch. 4 - How can reengineering of the sales order...Ch. 4 - What financial statement misrepresentations may...Ch. 4 - Give three examples of access control in a POS...Ch. 4 - Discuss the trade-off in choosing to update the...Ch. 4 - If an automated credit checking function denies a...Ch. 4 - How can advanced technology transaction processing...Ch. 4 - What makes POS systems different from revenue...Ch. 4 - Is a POS system that uses bar coding and a laser...Ch. 4 - How is EDI more than technology? What unique...Ch. 4 - Discuss the two common methods of achieving...Ch. 4 - Which function or department records a sale in the...Ch. 4 - Which functions should be segregated? a....Ch. 4 - Which of the following is incompatible task? a....Ch. 4 - Which control helps to ensure that the inventory...Ch. 4 - The bill of lading is prepared by the a. sales...Ch. 4 - Which of the following is NOT an independent...Ch. 4 - Which document defines terms for shipped goods...Ch. 4 - Which of the following sets of tasks should not be...Ch. 4 - Which of the following is often called a...Ch. 4 - Which document triggers the billing function? a....Ch. 4 - SEGREGATION OF FUNCTIONS Which, if any, of the...Ch. 4 - INTERNAL CONTROLS AND FLOWCHART ANALYSIS a....Ch. 4 - FLOWCHART ANALYSIS Use the flowchart for Problem 3...Ch. 4 - The following describes the cash receipts process...Ch. 4 - RISKS AND INTERNAL CONTROLS Following describes...Ch. 4 - INTERNAL CONTROL EVALUATION a. Identify the...Ch. 4 - STEWARDSHIP Identify which department has...Ch. 4 - Denis Frederick owns Never Leak, Inc., which is a...Ch. 4 - The following describes the information system for...Ch. 4 - The following describes the sales procedures for a...Ch. 4 - CONTROL WEAKNESSES AND RELATED RISKS -CASH...Ch. 4 - Refer to the system flowchart in the figure...Ch. 4 - In 1989, Robert Smith opened a small fruit and...Ch. 4 - Posavek is a wholesale supplier of building...Ch. 4 - Green Pond Nursery Supply (GPNS) is a garden...Ch. 4 - (Prepared by Will Richens and Michael Catchpole,...Ch. 4 - Outdoor Adventure is a Montana-based wholesaler of...

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