Assignment 1

 

Complete Problems 3 and 11 in Chapter 1 of the textbook. Each response should be in paragraph form and at least 500 words. Complete Problem 16 in Chapter 2. For the data flow diagram and flowchart you have the option to prepare your response in Word or Excel formats. For text answers in Excel, please use text boxes or other appropriate method to properly format the text.

While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.

 You are required to submit this assignment to LopesWrite. Refer to the 

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3. ACCOUNTING INFORMATION

SYSTEM ACQUISITION

What is the most likely system acquisition method—

commercial software, custom software, or ERP—for

each of the following situations? Explain your answers.

A heating and air-conditioning supply company with

20 employees that sells standard off-the-shelf products

to wholesale customers in a local community

needs a system to manage its affairs.

A major oil company with diverse holdings, complex

oil leases, and esoteric accounting practices needs a

system that can coordinate its many enterprises.

A large organization with multiple divisions needs

an information system to support its operations.

The information needs of the various divisions are

diverse, but standard within their respective

industries.

11. ROLE OF INTERNAL AUDIT

FUNCTION

Nano Circuits Inc, is a publicly traded company that

produces electronic control circuits, which are used in

many products. In an effort to comply with SOX,

Nano is in the process of establishing an in-house internal

audit function, which previously had been outsourced.

The company began this process by hiring a

Director of Internal Audits. Nano Circuits’ CEO

recently called a planning meeting to discuss the roles

of key corporate participants regarding the implementation

and maintenance of internal controls. Central to

this decision is the organizational placement of the

future internal audit function and to whom the new

Director of Internal Audit should report. In addition,

Nano Circuits considered the need to reconstitute its

Board of Directors Audit Committee. Participants at

the meeting included the company president, the chief

financial officer, a member of the audit committee, a

partner from Nano Circuits external audit firm, and

the Director of Internal Audits. Expectations and concerns

presented by the meeting participants are summarized

below.

CEO: The CEO expressed concern that Nano Circuits

complies with SOX and PCAOB requirements and

recommendations. The internal audit function should

strengthen the organization’s internal control system

by developing control policies and procedures and by

detecting violations of policies and procedures.

CFO: The CFO saw the role of the internal audit

function as one that should be focused primarily on

financial issues and therefore, the director of Internal

Audits should report to the CFO.

Audit committee member: The committee member felt

strongly that the Audit Committee as currently constituted

is appropriate and no changes need to be made.

Although none of the committee members are trained

accountants they all have extensive industry experience,

they have all been associated with Nano Circuits in

various capacities for many years, and are well qualified

to fulfill their policy-oversight responsibilities.

External audit partner: The external audit partner

pointed out that the internal audit function should

be organized such that it supports a close working

relationship with the external auditors. This would

include monitoring internal control systems on a

continuing basis to provide a body of evidence on

which the external auditor can rely.

Director of Internal Audits: The Director of Internal

Audits argued that the new IA function should focus

more on operational auditing issues, but it also

should play a role in the review of internal controls

over financial reporting.

Required

a. Describe the role that each of the following areas

has in the establishment, maintenance, and evaluation

of internal control:

i. Management

ii. External auditor

iii. Internal audit

b. To whom should the Director of Internal Audits

report? Explain your answer.

c. Comment on the audit committee member’s perspective

as to the committee’s current composition.

16. SYSTEM DOCUMENTATION—

REVENUE CYCLE MANUAL AND

COMPUTER PROCESSES

The following describes the revenue cycle procedures

for a hypothetical company.

The sales department clerk receives hard-copy

customer orders and manually prepares a six-part

hard-copy sales order. Copies of the sales order are

distributed to various departments as follows: Copies

1, 2, and 3 go to the shipping department, and Copies

4, 5, and 6 are sent to the billing department

where they are temporarily filed by the billing

clerk.

Upon receipt of the sales order copies, the shipping

clerk picks the goods from the warehouse

shelves and ships them to the customer. The clerk

sends Copy 1 of the sales order along with the

goods to the customer. Copy 2 is sent to the billing

department, and Copy 3 is filed in the shipping

department.

When the billing clerk receives Copy 2 from the

warehouse, she pulls the other copies from the temporary

file and completes the documents by adding

prices, taxes, and freight charges. Then, using the

department PC, the billing clerk records the sale in

the digital Sales Journal, sends Copy 4 (customer

bill) to the customer, and sends Copies 5 and 6 to

the AR and inventory control departments,

respectively.

Upon receipt of the documents from the billing

clerk, the accounts receivable and inventory control

clerks post the transactions to the AR Subsidiary

and Inventory Subsidiary ledgers,

respectively, using their department PCs. Each

clerk then files the respective sales order copies

in the department.

On the payment due date, the customer sends a

check for the full amount and a copy of the bill

(the remittance advice) to the company. These documents

are received by the mailroom clerk who distributes

them as follows:

1. The check goes to the cash receipts clerk, who

manually records it in the hard-copy cash

receipts journal and prepares two deposit slips.

One deposit slip and the check are sent to the

bank; the other deposit slip is filed in the cash

receipts department.

2. The remittance advice is sent to the AR clerk,

who posts to the digital subsidiary accounts and

then files the document.

Required

Prepare a data flow diagram and a system flowchart

of the revenue cycle procedures previously

described.

C H A P T E R 2 Introduction to Transaction Processing 89

9781337669023, Accounting Information Systems, Ninth edition, Hall – © Cengage Learning. All rights reserved. No distribution allowed without express authorization. Distributed by Grand Canyon