In order to preserve auditor independence, the Sarbanes Oxley Act of 2002 restricts the types of non-audit services that auditors can perform for their public‐company audit clients. The list includes nine types of services that are prohibited because they are deemed to impair an auditor’s independence. Included in the list are the following: • Financial information systems design and implementation • Internal audit outsourcing Describe how an auditor’s independence could be impaired if she performed IT design and implementation functions for her audit client. Likewise, how could an auditor’s involvement with internal audit outsourcing impair his or her independence with respect to auditing the same company?
> Read the online article at http://www. xconomy.com/boston/2010/09/20/netezza‐sold‐to‐ ibm‐for‐1‐7b‐will‐help‐big‐blue‐tackle‐big‐data/. Describe the services that Netezza offered and why IBM desired to purchase this company.
> Describe the advantages and disadvantages of using a distributed database and distributed data processing. Do you think the advantages are worthwhile? Explain your answer.
> Describe the purpose of each of the following parts of a manual system: a. Source document b. Turnaround document c. General ledger d. General journal e. Special journal f. Subsidiary ledger
> List and describe the steps involved in building a data warehouse.
> Arminello, Inc. does not use a database system; rather, it maintains separate data files in each of its departments. Accordingly, when a sale occurs, the transaction is initially recorded in the sales department. Next, documentation is forwarded from the
> Differentiate between batch processing and real‐time processing. What are the advantages and disadvantages of each form of data processing? Which form is more likely to be used by a doctor’s office in preparing the monthly patient bills?
> Exhibit 12‑9 shows a screen capture from Microsoft Dynamics GP accounting/ERP software. The following modules in Dynamics GP are shown: • Financial • Sales • Purchasing • Inventory • Payroll • Manufacturing • Fixed Assets For each of the following
> Compare investment processes with sales processes in terms of a. the frequency of transactions b. the volume of transactions c. the magnitude in dollars of a single transaction d. the manner of authorization
> Compare source of capital processes with sales processes in terms of a. the frequency of transactions b. the volume of transactions c. the magnitude in dollars of a single transaction d. the manner of authorization
> Using an Internet search engine, locate a publication called “RFID Journal.” Find a recent article that describes the use of RFID in manufacturing. Briefly describe the example(s) discussed in the article.
> Price discounts are commonly used in the business world as incentives for customers. How may this practice (or its misuse) be deemed unethical?
> Explain how the over‐production of inventories can be seen as unethical in an absorption costing environment.
> Using an Internet search engine, search for the terms “just in time” + “automotive.” From the results you find, explain why just‐in‐time inventory systems are such an important factor in the competitive automotive industry.
> Which type of accounting information system reports would likely be prepared most frequently by financial accountants? By managerial accountants?
> Using an Internet search engine, search for the terms “CAD” + “industrial robots.” Identify a company (name and location) that provides manufacturing automation by using robotics. Describe some of the robotic operations that are featured on the company’s
> Suppose a company is experiencing problems with omitted transactions in the conversion process— i.e., inventory transactions are not always being recorded as they occur. Refer to Exhibit 7‑7 to describe at least three internal controls that should be in
> Using an Internet search engine, search for the terms “Patti Dale” and “theft.” (Be sure to include the quotation marks around the name.) Explain the unethical behavior that occurred. Also, explain any internal controls that you believe were missing or n
> Read the article at this link: www.offthe gridnews.com/privacy/how‑car‑insurance‑ companies‑are‑tracking‑your‑every‑move/. Describe any ethical considerations in using such technology. Consider both the company and employee perspectives. Also discuss whe
> Using an Internet search engine, search for the phrase “fixed asset software.” (Be sure to include the quotation marks.) Examine the results to find companies that sell fixed asset software. List and explain some of the features of fixed asset software t
> Using an Internet search engine, search for the phrase “biometric time clock.” (Be sure to include the quotation marks.) From your search results, describe a biometric time recording system and its advantages.
> Explain the process of approval of purchases for fixed assets. How does this process differ from that of purchasing raw materials?
> Suppose you are an accounts payable clerk for a small home‐improvements contractor. This morning one of the site supervisors submitted an invoice requesting immediate payment to a new vendor for items he claims were delivered directly to a work site. The
> Using a search engine, search the Internet for an article titled “The advantages of customer self-service for B2B Electronic Invoice Presentment and Payment (EIPP)” Briefly explain what the article describes as the advantages of adopting EIPP.
> Using a search engine, search the Internet for information about electronic invoice presentment and payment. You may have more success searching for the terms “EIPP” and “invoices” together in one search. On some websites, it may be called EIP rather tha
> Think about your most recent appointment at the dentist’s office. Describe the business processes that affected you as the patient/customer. In addition, describe the administrative and accounting processes that are likely to support this business.
> Koler Manufacturing Company operates two plants that manufacture shelves and display units for retail stores. To manufacture these items, the purchasing agents purchase raw materials such as steel, aluminum, plastic, lexan, and miscellaneous screws, rubb
> Using a search engine, search the Internet for information about evaluated receipt settlement, or ERS. You may have more success searching for the terms “ERS” and “invoices” together in one search. From what you read about ERS on the Web, what do you thi
> Kittner, Inc., is a small company with three people working in the expenditures processes. One of the three employees is the supervisor of the other two. Some tasks that must be accomplished within the expenditures processes are the following: a. Account
> Since the accounts payable system of matching POs, invoices, and receiving reports can often be complex, organizations must routinely check to ensure that they are not making a duplicate payment. The textbook website contains a spreadsheet titled “invoic
> The following list presents statements regarding the expenditures processes. Each statement is separate and should be considered to be from a separate company. Determine whether each statement is an internal control strength or weakness; then describe wh
> Holsten Company is considering a business process reengineering (BPR) project whereby its current (mostly manual) expenditures processing would be converted to an automated system. Brainstorm ideas for this project. Specifically, what processes could be
> Joy Tucker started a new business: a coffee and pastry cart located at the local library. Joy hired her brother, Eric, as her assistant. Joy and Eric personally make all the purchases of items needed to stock the cart, using procurement cards issued in t
> Compare how a company with a manual process of matching a PO, receiving report and vendor invoice would differ from a company that uses Microsoft Dynamics GP or other integrated ERP solution where automated (electronic) matching of a PO, receiving report
> Identify an internal control procedure that would reduce the following risks in automated fully integrated ERP system such as Microsoft Dynamics GP: a. The purchasing department may not be notified when goods need to be purchased. b. Accounts payable m
> Identify an internal control procedure that would reduce the following risks in a manual system: a. The purchasing department may not be notified when goods need to be purchased. b. Accounts payable may not be updated for items received. c. Purchase ord
> Melissa Simpson is currently pursuing her accounting degree at Fairfield University. She has excelled in each of her major courses to date; however, she tends to struggle in her computer classes and with assignments requiring use of computer technology.
> Refer to the Real World example for City Harvest and the details in the chapter. Outline the business process improvements that can occur in the inventory and purchasing processes when a manual or nonintegrated system is replaced with a fully integrated
> This chapter mentioned alleged fraudulent revenue reporting at Coca‐Cola and McAfee. Using a search engine, search the phrase “SEC Channel Stuffing.” Give one more example of a company that was investigated, or is being investigated, by the SEC. What are
> Using a search engine, locate an article written by Vangie Beal titled “Top 2012 eCommerce Trends.” Briefly describe the main point of this article.
> Visit the financial education website created by Equade Internet Ltd. at www.investopedia.com. Note the definition for channel stuffing. According to this site, what is the primary motivation for channel stuffing?
> The following list presents various internal control strengths or risks that may be found in a company’s revenues and cash collection processes: ——— Credit is authorized by the credit manager. ——— Checks paid in excess of $5,000 require the signatures o
> When an order for inventory items is fulfilled, in Microsoft Dynamics GP the items are reviewed to see if there is available stock to fill the order for the line item. If there is no available stock, the user may select one of the following options: a. S
> Identify an internal control procedure that would reduce each of the risks that follow in a manual system. Also, describe how (or if) an IT system could reduce these risks: a. Revenues may be recorded before the related shipment occurs. b. Employees re
> Caleb Westerfield is the owner of CW Sports, a consignment shop for used sporting goods. Caleb accepts consigned goods and offers them for sale to the general public. Caleb rents business space, including a retail store where the consigned goods are disp
> You are the recent heir of $40,000 cash, with which you are considering opening a sushi bar in the university community. You would accept cash and credit card payments, which would be handled primarily by your servers. You also plan to offer introductory
> In 1990, Luigi Romano opened a pizza restaurant that he named Romano’s in St. Louis, Missouri. Over the years, he opened both company and franchise locations and grew the business to include over 40 restaurants that serve the three states around the St.
> Describe why accountants should be concerned about ethics.
> Perform an Internet search to determine the nature of Xerox Corporation’s management fraud scheme and to find out what happened to the company after the problems were discovered.
> Visit the ISACA website at www.isaca.org and click the Knowledge Center tab, then select ITAF (Information Technology Assurance Framework) and click on the IT Audit Basics tab to find articles covering topics concerning the audit process. Locate an artic
> Given is a list of audit standard‑setting bodies (shown on the left) and a description of their purpose (shown on the right). Match each standard‐setting body with its purpose. I. PCAOB a. Established by the AICPA
> Using the Internet or other research tool, search for “Microsoft Dynamics GP software” and describe the type of company where Great Plains would be a good choice for an ERP system.
> Using the Internet or other research tool, search for “SAP software” and describe the type of company where SAP would be a good choice for an ERP system.
> Using the Internet or other research tool, search for “compare ERP software” and describe pros and cons of two Midmarket/tier two ERP systems.
> Using the Internet or other research tool, search for “Total Cost of Ownership” and “ERP Software” and describe costs to consider when calculating the total cost of ownership for an ERP system.
> Using the Internet or other research tool, search for “ERP software in the cloud” and outline (a) pros, (b) cons, and (c) considerations of adopting cloud deployment for an ERP system.
> Using the Internet or other research tool, search for the terms “ERP” and “SME.” Describe why a small to medium‐sized entity might choose an ERP system.
> Give a brief summary of each of the following: a. enterprise risk management b. corporate governance c. IT governance
> Using the Internet or other research tool, search for the terms “big bang” and ERP. Identify at least one company that represents a success story with regard to this ERP implementation method (other than Marathon, as described in this chapter’s RealWorld
> Using the Internet or other research tool, search for the terms “best of breed ERP systems strategy” and ERP. Locate information that addresses the debate and dilemma faced by many companies regarding the implementation choice between best of breed techn
> Suppose a company is experiencing problems with omitted transactions in the conversion processes—that is, inventory transactions are not always being recorded as they occur. How can an ERP system help to alleviate such a problem?
> Compare and contrast the functionality of the logistics module and supply chain management activities.
> Identify and describe the first generation of ERP systems used in the 1970s and the second generation of ERP systems used in the 1980s.
> Describe the ERP’s modular interface that is necessary in a typical manufacturing environment.
> Go to any website that sells goods. Examples would be BestBuy, Staples, and J. Crew. Pretend that you wish to place an order on the site you choose and complete the order screens for your pretend order. Do not finalize the order or enter either real or f
> Using the Internet or other research tool, look up the terms “disaster recovery,” along with “9/11.” The easiest way to search for both terms together is to type into the search box the following: “disaster recovery” “9/11.” Find at least two examples of
> Visit the AICPA website at www.aicpa.org. Search for the terms “WebTrust” and “SysTrust.” Describe these services and the role of Trust Services Principles in these services.
> Using the Internet or other research tool, look up the term “penetration testing.” Describe the software tools you find that are intended to achieve penetration testing. Describe the types of systems that penetration testing is conducted upon.
> The networks discussed in this chapter were LANs, Internet, intranet, and extranet. Explain each.
> The IT governance committee should comprise top level managers. Describe why you think that is important. What problems are likely to arise with regard to IT systems if the top level managers are not involved in IT governance committees?
> Explain how each of the following input validation checks can prevent or detect errors: a. Field check b. Validity check c. Limit check d. Range check e. Reasonableness check f. Completeness check g. Sign check h. Sequence check i. Self checking
> Control totals include batch totals, hash totals, and record counts. Which of these totals would be useful in preventing or detecting IT system input and processing errors or fraud described as follows? a. A payroll clerk accidentally entered the same t
> Many IT professionals feel that wireless networks pose the highest risks in a company’s network system. Required: a. Why do you think this is true? b. Which general controls can help reduce these risks?
> The use of smart cards or tokens is called two factor authentication. Answer the following questions, assuming that the company you work for uses smart cards or tokens for two factor authentication. Required: a. What do you think the advantages and di
> Explain why an organization should establish and enforce policies for its IT systems in the following areas regarding the use of passwords for log in: a. Length of password b. Use of numbers or symbols in passwords c. Using common words or names as pa
> Using a search engine, search for articles on the following two companies, which were paying bribes in foreign countries: Siemens and Johnson & Johnson. The settlements were in 2011. For each company, describe a. How it was discovered b. The end result
> Using a search engine on the Internet, search for articles on fraud that occurred in 2000 to 2002 in the following companies: Adelphia Enron Global Crossing WorldCom Xerox Try to locate articles or information about stock prices, how the fraud was
> Using a search engine on the Internet, find articles or descriptions of the collapse of Enron. The collapse began in November 2001, and many articles appeared over the next two to three years. Required: a. Briefly describe the fraud that occurred. b.
> Shown are a list of selected sources of internal control guidelines, given in order of issuance, followed by a list of primary purposes. Match each guideline with its primary purpose. I. Foreign Corrupt Practices Act II. COSO III. SAS 99 IV. Sarbanes
> Consider the accounting information system in place at an organization where you have worked. Do you think that it was a manual system, a legacy system, or an integrated IT system? Describe one or two characteristics of that accounting information system
> Identify whether each of the following accounting positions or duties involves authorization, recording, or custody: • Cashier • Payroll processor • Credit manager • Mailroom clerk • Data entry clerk • Deliver paychecks • Deliver the bank deposit
> Using the Internet or other research tool, search for the terms “client–server” and “scalable.” From the results you find, explain why client–server systems are scalable.
> Using the Internet or other research tool, search for the term “RFID.” From the results you find, describe how RFID will be used as an input method.
> Suppose that a large company is considering replacing a legacy system that is nearing obsolescence. Describe any aspects of this decision that the company should consider.
> Using the Internet or other research tool, search for the terms “Amazon elastic cloud.” Describe what you find. Why do you believe it is called elastic?
> Using the Internet or other research tool, search for “HealthSouth” and “fraud” or “Scrushy” (the name of the company’s CEO). Explain the fraud that occurred at HealthSouth Corporation. What was the ultimate result of the prosecution of HealthSouth offic
> Using the Internet or other research tool, search for the term (in quotations) “earnings management.” From the items you read, answer the following questions: a. Is earnings management always criminal? b. Is earnings management always unethical?
> Go to the COSO website and locate the guidance on enterprise risk management. The executive summary of the article “Enterprise risk management—Integrated Framework” can be downloaded at no cost. Read the sections titled “Roles and Responsibilities” and “
> Using the Internet or other research tool, search for the terms “RFID” and “supply chain.” Put both of these terms in your search and be sure that “supply chain” is in quotation marks. Read some of the resulting websites you find and answer these questio
> Each of the points listed next represents an internal control that may be implemented within a company’s accounting information system to reduce various risks. For each point, identify the appropriate business process (revenue, expenditure, conversion, a
> For an accounts receivable system, what kind of data would be found in the master files and transaction files, respectively? What type of structured and unstructured data might relate to an accounts receivable system?
> Business processes are composed of three common stages: an initial event, a beginning, and an end. For items a–h listed in Problem 48, identify the applicable initial event, beginning, and end of the process. From problem 48: Classify each of the follow
> Classify each of the following as a revenue process, expenditure process, conversion process, or administrative process: a. Selling common stock to raise capital b. Purchasing electronic components to manufacture DVD players c. Moving electronic compo
> If an accounting information system were entirely a manual system (no computers used), explain how data would be captured, recorded, classified, summarized, and reported. Discuss how the sophistication of the company’s computer system impacts the account
> Thomas Clark is an accounting software consultant at Tann and Associates Consulting. Tann is a value added reseller of accounting software for midsize companies, which normally have revenue between $50 million and $500 million. One of Clark’s responsibil
> There are several approaches to applying an SDLC methodology to IT system change. Using an Internet search engine, search for these terms: SDLC, waterfall, JAD (joint application development), RAD (rapid application development), build and fix, and spira
> CEEMCO Corp. is a small, privately owned manufacturing company in Cincinnati. CEEMCO manufactures custom products as well as store display products to sell to other companies such as retailers. Using an Internet search engine, do a search on the terms “C
> Assume that you are the manager of the project team that is engaged in a systems analysis. The company is a large, national retailer with several stores and warehouses located throughout the United States. The corporate headquarters are in Atlanta, and a
> What is the importance of a standard formatting language for Web pages and a standard addressing system?
> Describe the relationship between national backbone providers, regional ISPs, and local ISPs.
> How do e-commerce and e-business differ?
