Georgia
Beemster, CPA, is examining the financial statements of the Louisville Sales
Corporation, which recently installed a computerized processing system. The
following comments have been extracted from Beemster’s notes on the computer
operations and the processing and control of shipping notices and customer
invoices:
To minimize
inconvenience, Louisville made the conversion to the new accounting information
system without changing its existing system. The vendor supervised the
conversion and trained all the computer department employees in the systems
design, operations, and programming.
Each
computer run is assigned to a specific employee who is responsible for making
program changes, running the program, and answering questions.
At least one
computer department employee remains in the computer room during office hours
and only computer department employees have keys to the computer room.
The vendor
provided Louisville with systems documentation consisting of a set of record
formats and programs lists. This documentation and the files are maintained in
the computer department.
Louisville
considered the desirability of IT controls but decided to retain the manual
controls from its existing system.
Louisville’s
products are shipped directly from public warehouses, which forward shipping
notices to general accounting. There, a billing clerk enters the price of the
items and accounts for the numerical sequence of the shipping notices from each
warehouse.
Shipping
notices and daily summaries are forwarded to the computer department for input
and processing. Extension calculations are made on the computer. Output
consists of invoices (in six copies) and a daily sales register. The daily
sales register shows the aggregate totals of units shipped and the unit prices,
which the computer operator compares to the daily summaries.
All copies
of the invoice are returned to the billing clerk. The clerk mails three copies
to the customer, forwards one copy to the warehouse, maintains one copy in a
numerical file, and retains one copy in an open invoice that serves as a
detailed accounts receivable record.
1.
Describe at least 10 weaknesses in internal
control information and data flows and the procedures for processing shipping
and customer invoices.
2.
Details describing your findings are required.
3.
Recommend improvements in each control policy
and procedure deficiency that you identify.
1.
Organize your answer
sheet with two columns, one headed “Weaknesses” and the other headed
“Recommended Improvements”. In the columns required, would briefly describe the
strengths and weaknesses you found.
2.
Then,
the rest of your paper of 12 pages total should explain your deeper analysis of
each issue and how/why you selected those strengths and weaknesses and the
audit implications of each.
***Please don’t use A.I. It will be detected and contract cancel**
Please include and introduction. Follow instructions, and use textbook provided. If outside source are used. Please make sure it can be easy access. Include PAGE NUMBER when CITING.
Textbook/PDF – Auditing and Aussurance Service, 2024.
See Module H
Chapter 5
Chapter 4
Chapter 1
Chapter 2
