Chapter 1 Solutions
Introduction to AIS
Turner/Accounting Turner/Accounting Information Systems, 2e Solutions Manual Chapter 1
Concept Check 1. d 2. d 3. b 4. c 5. c 6. c 7. b 8. b 9. b 10.a
Discussion Questions 11. 11. (SO 1) How might the sales and cash collection processes at a Wal-Mart store differ from the sales and cash collection processes at McDonald’s? Wal-Mart sells items that are re-riced a!d bar c"ded #ith #ith that rice. $here%"re the cash re&isters at Wal-Mart 'se bar c"de sca!!ers. "#eer* Mc+"!alds sells %ast %""ds %""ds that are !"t bar c"ded. $he cash re&isters at Mc+"!alds Mc+"!alds 'se t"'ch scree! s,stems that that re'ire a cashier t" i!dicate the items 'rchased. $he cash c"llecti"! r"cesses are !"t di%%ere!t. ! b"th cases* the the eml",ee c"llects the cash "r credit card* a!d ret'r!s a!, cha!&e. 12.(SO 1) Can you think of any procedures in place at McDonald’s that are intended to ensure the accuracy of your order? St'de!t res"!ses ma, ar,* h"#eer* %"ll"#i!& are a %e# e/amles O%te!* at either either the drie-thr"'&h "r the i!side i!side cash re&ister* the c'st"mer ca! see a scree! that disla,s the items "rdered. ! additi"!* a %ast %""d resta'ra!t 'ses re-desi&!ed sl"ts t" h"ld certai! t,es "% me!' items. Whe! a c'st"mer "rders a artic'lar sa!d#ich* the ers"! %illi!& the "rder !"#s e/actl, #hich sl"t t" 'll the sa!d#ich %r"m. ach c'st"mer receies a ri!ted receit #ith the items listed a!d the c'st"mer ca! eri%, the acc'rac,. 13.(SO 1) How might the sales and cash collection processes at Boeing Co. maker of commercial passenger !ets" differ from the sales and cash collection processes at
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McDonald’s? "ei!& d"es !"t sell t" e!d-'ser c"!s'mers rather* it sells t" c"ma!ies s'ch as airli!es. $here%"re "ei!& d"es !"t hae st"res* !"r i!e!t"r, i! st"res* !"r cash re&isters t" r"cess sales. "ei!& is m"re liel, t" mai!tai! a sales %"rce that isits "te!tial c'st"mers t" s"licit sales. $h"se sales ma, be e!tered b, the salesers"! i!t" a lat" c"m'ter c"!!ected t" "ei!&s !et#"r. Mc+"!alds* "! the "ther ha!d* sells t" c"!s'mers* 'ses "rder i!'t t"'ch scree!s at each l"cati"!* a!d mai!tai!s s'lies "% erishable %""d r"d'cts.
14.(SO 1) #re there $usiness processes that do not in some way affect accounting records or financial statements? $here ma, be r"cesses that d" !"t directl, a%%ect acc"'!ti!& rec"rds (s'ch as recr'iti!& a!d hiri!& a !e# eml",ee)* b't all r"cesses hae a direct "r i!direct a%%ect "! acc"'!ti!& rec"rds. ll r"cesses 'se res"'rces s'ch as material "r eml",ee time. $here%"re* all r"cesses hae e/e!ses related t" th"se r"cesses that #ill a%%ect the acc"'!ti!& rec"rds. 15.(SO 2) Briefly descri$e the fi%e components of an accounting information system. 1. W"r stes #ithi! a b'si!ess r"cess that cat're acc"'!ti!& data as the b'si!ess r"cess "cc'rs. 2. Ma!'al "r c"m'ter-based rec"rds that cat're the acc"'!ti!& data %r"m the b'si!ess r"cesses. 3. !ter!al c"!tr"ls #ithi! the b'si!ess r"cess that sa%e&'ard assets a!d e!s're acc'rac, a!d c"mlete!ess "% the data. 4. W"r stes that r"cess* classi%,* s'mmarie* a!d c"!s"lidate the ra# acc"'!ti!& data. 5. W"r stes that &e!erate b"th i!ter!al a!d e/ter!al re"rts. 16.(SO 2) Descri$e how sales data are captured and recorded at a restaurant such as #pple$ee’s. t m"st lebees resta'ra!ts* a serer #rites the "rder "! a ad a!d carries that ad t" a cash re&ister. $he serer e!ters the "rder "! a t"'ch scree! termi!al. $he "rder i!%"rmati"! is the! disla,ed "! a termi!al i! the itche!. Whe! the c'st"mer has %i!ished the meal* the serer ri!ts a chec a!d deliers the chec t" the table. $he c'st"mer a,s the serer b, 'si!& cash "r a credit card. $he serer r"cesses the a,me!t "! the t"'ch scree! re&ister a!d ret'r!s the cha!&e "r credit card sli t" the c'st"mer. 17.(SO 2) What occurs in an accounting information system that classifies accounting transactions? "r each b'si!ess r"cess that a%%ects acc"'!ti!& rec"rds* the acc"'!ti!& i!%"rmati"! s,stem m'st cat're a!, res'lti!& acc"'!ti!& data* rec"rd the data* r"cess it thr"'&h classi%icati"!* s'mmariati"!* a!d c"!s"lidati"!* a!d &e!erate ar"riate re"rts. 18.(SO 2) What are the differences $etween internal reports and e&ternal reports generated $y the accounting information system? !ter!al re"rts are 'sed b, ma!a&eme!t t" "ersee a!d direct r"cesses #ithi! the "r&a!iati"!. /ter!al re"rts are the %i!a!cial stateme!ts 'sed b, i!est"rs a!d credit"rs t" mae
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Introduction to AIS
decisi"!s ab"'t i!esti!& "r e/te!di!& credit t" the "r&a!iati"!. 19.(SO 3) What types of $usinesses are in the supply chain of an automo$ile manufacturer? $he t,es "% b'si!esses i! a! a't"maers s'l, chai! are "%te! ma!'%act'rers "% arts 'sed i! cars. $his #"'ld i!cl'de ma!'%act'rers "% tires* batteries* steel* lastic* i!,l a!d leather* as #ell as ma!, "ther ma!'%act'rers mai!& the th"'sa!ds "% arts i! a car. 20.(SO 3) When a company e%aluates a supplier of materials' what kinds of characteristics might $e e%aluated? $he s'liers characteristics that are liel, t" be eal'ated i!cl'de rice a!d a,me!t terms* 'alit,* reliabilit, "% the materials* as #ell as #hether the s'lier ca! delier materials #he! !eeded. 21.(SO 3) How do you think a company may $e a$le to influence a supplier to meet its $usiness processing re(uirements? c"ma!, ma, be able t" i!%l'e!ce a s'lier b, ch""si!& "!l, s'liers that meet e/ectati"!s re&ardi!& the terms "% rice* 'alit,* a!d delier, timi!&. $h"se s'liers that d" !"t meet these e/ectati"!s ma, !"t be 'sed i! the %'t're. $his e/erts s"me i!%l'e!ce "er s'liers* as the s'liers #ill l"se b'si!ess i% the, d" !"t meet the b',ers re'ireme!ts. 22.(SO 4) Descri$e any )* ena$lement that you ha%e noticed at a large retail store such as Wal-Mart or *arget. $he m"st !"ticeable $ e!ableme!t is the 'se "% bar c"ded s,stems "! the r"d'cts a!d h"# the, are read b, the cash re&isters. 23.(SO 4) How do you think the World Wide We$ WWW" has led to $usiness process reengineering at companies such as +ands ,nd or .Crew? ri"r t" the W"rld Wide Web* c'st"mers laced "rders either "! the h"!e "r b, mail. "th h"!e a!d mail "rders re'ire eml",ees t" tae the "rder a!d e!ter it i!t" the c"m'ter s,stem. :si!& "!li!e sales* c'st"mers e!ter their "#! "rders a!d !" c"ma!, ers"!!el are !eeded t" e, "rders i!t" the c"m'ter s,stem. $here%"re* there #as a ma;"r cha!&e i! the !'mber "% e"le eml",ed t" e, "rders. 24.(SO 4) What two kinds of efficiency impro%ement result from $usiness process reengineering in con!unction with )* systems? $he 'se "% $ s,stems 's'all, leads t" t#" i!ds "% e%%icie!c, imr"eme!ts. irst* the '!derl,i!& r"cesses are ree!&i!eered (thr"'&h rethi!i!& a!d redesi&!) t" be c"!d'cted m"re e%%icie!tl,. Sec"!d* the $ s,stems imr"e the e%%icie!c, "% the '!derl,i!& r"cesses. 25.(SO 5) ,&plain the differences $etween a field' a record' and a file. %ield is "!e set "% characters that mae ' a si!&le data item. "r e/amle* last !ame #"'ld be a %ield i! a c'st"mer database. rec"rd is a c"llecti"! "% related %ields %"r a si!&le e!tit,. "r e/amle* last !ame* %irst !ame* address* h"!e !'mber* a!d credit card !'mber %ields mi&ht mae ' a si!&le c'st"mer rec"rd. %ile is a c"llecti"! "% similar rec"rds. "r e/amle* all c'st"mer rec"rds t"ðer mae ' a c'st"mer %ile.
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Introduction to AIS
26.(SO 5) ,&plain why random access files would $e prefera$le to se(uential access files when payroll personnel are changing a pay rate for a single employee. Whe! the desired acti"! is t" access a si!&le rec"rd* ra!d"m access is re%erable. % se'e!tial access st"ra&e is 'sed* all rec"rds m'st be read i! se'e!ce '!til the desired rec"rd is reached. O! the "ther ha!d* ra!d"m access all"#s a si!&le rec"rd t" be accessed #ith"'t the !ecessit, "% readi!& "ther rec"rds. $his maes it m"re e%%icie!t t" access a artic'lar eml",ee rec"rd t" cha!&e the a, rate. 27.(SO 5) Why do real-time systems re(uire direct access files? % tra!sacti"!s are t" be r"cessed "!li!e a!d i! real-time* it is !ecessar, that the c"m'ter access a si!&le rec"rd immediatel,. $h's* direct access %iles are re'ired s" the rec"rds ca! be accessed i! real-time. 28.(SO 5) Why is data contained in the data warehouse called non%olatile? ach time a !e# tra!sacti"! is c"mleted* arts "% the "erati"!al data m'st be 'dated. $here%"re* the "erati"!al database is "latile < #ith c"!sta!tl, cha!&i!& i!%"rmati"!. "#eer* the data #areh"'se d"es !"t cha!&e #ith each tra!sacti"!. $he data #areh"'se is "!l, cha!&ed #he! eri"dic 'dates "cc'r. $he data i! the data #areh"'se are !"!"latile beca'se the, d" !"t cha!&e c"!sta!tl,. 29.(SO 5) How is an e&tranet different from the )nternet? $he e/tra!et all"#s access "!l, t" selected "'tsiders* #hile the !ter!et is "e! t" a! '!limited !'mber "% "'tsiders (esse!tiall, a!,"!e hai!& access t" the !ter!et). O! the "ther ha!d* e/tra!ets are t,icall, 'sed b, c"ma!ies t" i!teract #ith seci%ic s'liers a!d c'st"mers #h" hae bee! &ra!ted access t" a c"ma!,s !et#"r. 30.(SO 6) repare a list of the types of $usinesses that you ha%e $een in that use point of sale systems. St'de!t res"!ses ma, ar,* b't #"'ld liel, i!cl'de deartme!t st"res* &r"cer, st"res* secialt, st"res* resta'ra!ts* &as stati"!s* a!d car #ashes. 31.(SO 6) What do you think would $e the ad%antages of an e-paya$les system o%er a traditional system that uses paper purchase orders and in%oices? ! e-a,ables s,stem sh"'ld be %aster a!d m"re e%%icie!t tha! a aer-based s,stem. ! additi"!* %e#er r"cessi!& err"rs sh"'ld be e/ected %r"m a! e-a,ables s,stem. 32.(SO 7) Descri$e why enterprise risk management is important. ll "r&a!iati"!s %ace riss a!d !terrise =is Ma!a&eme!t (=M) assists ma!a&ers i! red'ci!& a!d c"!tr"lli!& ris. =M als" i!"les ers"!!el acr"ss the e!tire b'si!ess "r&a!iati"!* as the, imleme!t strate&ies t" achiee the "r&a!iati"!s "b;ecties. 33.(SO 7) What is the difference $etween general controls and application controls? >e!eral c"!tr"ls al, "erall t" the $ acc"'!ti!& s,stem. $he, are c"!tr"ls that are !"t restricted t" a!, artic'lar acc"'!ti!& alicati"!. ! e/amle "% a &e!eral c"!tr"l is the 'se "% ass#"rds t" all"# "!l, a'th"ried 'sers t" l"& i!t" a! $-based acc"'!ti!& s,stem. licati"! c"!tr"ls are 'sed seci%icall, i! acc"'!ti!& alicati"!s t" c"!tr"l i!'ts* r"cessi!&* a!d "'t't. licati"! c"!tr"ls are
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Introduction to AIS
i!te!ded t" i!s're that i!'ts are acc'rate a!d c"mlete* r"cessi!& is acc'rate a!d c"mlete* a!d that "'t'ts are r"erl, distrib'ted* c"!tr"lled* a!d dis"sed. 34.(SO 7) )n what way is a code of ethics $eneficial to an organi/ation? % t" ma!a&eme!t i!stit'tes a c"de "% ethics a!d emhasies this c"de b, m"deli!& its ri!ciles a!d discili!i!& "r dischar&i!& th"se #h" i"late the c"de* it ca! hel red'ce '!ethical behai"r i! the "r&a!iati"!. 35.(SO 8) What roles do accountants ha%e in relation to the accounting information system? cc"'!ta!ts are 'sers "% the S* the, assist i! the desi&! "% the S* a!d the, are a'dit"rs "% the S.
rief !"ercises 36. (SO 1) 0or each category of $usiness processes re%enue' e&penditure' con%ersion' administrati%e"' gi%e an e&le of a $usiness process . St'de!t res"!ses are liel, t" ar, &reatl,* as the, ma, re%er t" a!, "% the s'br"cesses #ithi! each cate&"r,. "r e/amle* the ree!'e r"cesses i!cl'de sales* sales ret'r!s* a!d cash c"llecti"!s the e/e!dit're r"cesses i!cl'de 'rchasi!&* 'rchase ret'r!s* cash disb'rseme!ts* a,r"ll* a!d %i/ed asset r"cesses the c"!ersi"! r"cesses i!cl'de la!!i!&* res"'rce ma!a&eme!t* a!d l"&istics admi!istratie r"cesses i!cl'de caital r"cesses* i!estme!ts* a!d &e!eral led&er r"cesses. cc"rdi!&l,* a!, t,e "% b'si!ess r"cess ca! be cited t" a!s#er this 'esti"!* b't the st'de!t m'st match the e/amle #ith the ar"riate r"cess. 37.(SO 2) *hink of a company that you ha%e worked for or with which you ha%e done $usiness. Which departments within the company need reports generated $y the accounting information systems? St'de!t res"!ses are liel, t" ar, &reatl,* as !earl, eer, deartme!t #ithi! a b'si!ess "r&a!iati"! 'ses re"rts &e!erated b, the acc"'!ti!& i!%"rmati"! s,stems. "r e/amle* sales deartme!ts !eed c'st"mer acc"'!t i!%"rmati"! t" hel i! their e%%"rts t" sell r"d'cts t" c'st"mers. 'rchasi!& deartme!ts !eed r"d'ct i!%"rmati"! t" hel i! their e%%"rts t" 'rchase r"d'cts !eeded i! the b'si!ess. $hese t,es "% i!%"rmati"! are mai!tai!ed i! acc"'!ti!& i!%"rmati"! s,stems. $here are !'mer"'s additi"!al e/amles that c"'ld al,. 38.(SO 3) ,&plain a supply chain linkage and gi%e an e&le . s'l, chai! li!a&e is the c"!!ecti"! "% actiities i! the s'l, chai!* i!cl'di!& the e!tities* r"cesses* a!d i!%"rmati"! %l"#s that i!"le the m"eme!t "% materials* %'!ds* a!d related i!%"rmati"! thr"'&h the %'ll l"&istics r"cess < %r"m the ac'isiti"! "% ra# materials t" the delier, "% %i!ished r"d'cts t" the e!d 'ser. t there%"re i!cl'des the li!ed actiities "% e!d"rs* serice r"iders* c'st"mers* a!d i!termediaries. ! additi"! t" the e/amle "% Mc+"!alds b'!s &ie! i! the te/t* a!"ther e/amle #"'ld be a shirt s"ld b, the >a. $he >as s'l, chai! li!a&e #"'ld liel, i!cl'de a s'lier %r"m #h"m the shirt #as 'rchased* a ma!'%act'rer #h" assembled a!d se#ed the shirt*
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Introduction to AIS
a sec"!dar, s'lier that r"ided the %abric %r"m #hich the shirt #as c"!str'cted* a!d a %armer #h" raised c"tt"! 'sed t" mae the %abric. 39.(SO 4) ,&plain how $usiness process reengineering occurs. #lso' e&plain how it differs from the typical changes in company policies . With b'si!ess r"cess ree!&i!eeri!& (=)* the '!derl,i!& b'si!ess r"cesses are ree!&i!eered t" be c"!d'cted m"re e%%icie!tl,. ! "ther #"rds* a c"mrehe!sie rethi!i!& a!d redesi&! taes lace i! "rder t" e!ha!ce er%"rma!ce "% the r"cess. e, c"m"!e!t "% = is the leera&i!& "% $ caabilities t" imr"e r"cess e%%icie!cies. = di%%ers %r"m t,icall, "r&a!iati"!al cha!&e i! that it i!"les ?thi!i!& "'tside the b"/@ i! "rder t" "%%er c"mletel, !e# a!d imr"ed meth"ds %"r b'si!ess r"cesses. 40.(SO 5) 0or an accounts recei%a$le system' what kind of data would $e found in the master files and transaction files' respecti%ely? ! acc"'!ts receiable master %ile #"'ld i!cl'de relatiel, erma!e!t data !ecessar, t" r"cess c'st"mer tra!sacti"!s. $his #"'ld i!cl'de a rec"rd %"r each c'st"mer. $he data i! the master %ile #"'ld liel, i!cl'de c'st"mer !ame* address* h"!e !'mbers* credit limit* a!d c'rre!t bala!ce. tra!sacti"! %ile %"r acc"'!ts receiable #"'ld c"!tai! the relatiel, tem"rar, data that m'st be r"cessed t" 'date the master %ile* s'ch as details %r"m i!diid'al sales a!d cash c"llecti"! tra!sacti"!s %r"m c'st"mers. 41.(SO 5) Descri$e the differences in the following three types of processing1 a. Batch processing i!"les the &r"'i!& "% similar tra!sacti"!s t" be r"cessed t"ðer b. 2nline processing i!"les r"cessi!& i!diid'al tra!sacti"!s* "!e-at-a-time a!d c. 3eal-time processing is a! "!li!e r"cessi!& meth"d that i!"les the immediate r"cessi!& "% i!diid'al tra!sacti"!s. 42.(SO 5) *he networks discussed in this chapter were +#4s' )nternet' intranet' and e&tranet. ,&plain each . AB is a c"m'ter !et#"r that sa!s a relatiel, small area s'ch as a b'ildi!& "r &r"' "% b'ildi!&s #ithi! a b'si!ess "r&a!iati"!. $he !ter!et is the &l"bal c"m'ter !et#"r made ' "% milli"!s '"! milli"!s "% c"m'ters a!d s'b!et#"rs thr"'&h"'t the #"rld. ! i!tra!et is a! "r&a!iati"!s riate c"m'ter !et#"r* accessible "!l, b, eml",ees "% that "r&a!iati"! t" share data a!d ma!a&e r";ects. ! e/tra!et is a! e/a!si"! "% a! i!tra!et that all"#s limited access t" desi&!ated "'tsiders s'ch as c'st"mers a!d s'liers. 43.(SO 7) 5i%e a $rief summary of each of the following1 a. enterprise risk management is a! "!&"i!& strate&,-setti!& a!d ris assessme!t r"cess that is e%%ected b, t" ma!a&eme!t b't i!"les ers"!!el acr"ss the e!tire e!tit,. b. corporate go%ernance is a! elab"rate s,stem "% checs a!d bala!ces #hereb, a c"ma!,s leadershi is held acc"'!table %"r b'ildi!& shareh"lder al'e a!d creati!& c"!%ide!ce i! the %i!a!cial re"rti!& r"cess.
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c. )* go%ernance is the c"r"rate &"er!a!ce r"cess that alies seci%icall, t" the r"er ma!a&eme!t* c"!tr"l* a!d 'se "% $ s,stems. 44.(SO 9) Descri$e why accountants should $e concerned a$out ethics . cc"'!ta!ts sh"'ld be c"!cer!ed ab"'t ethics beca'se acc"'!ti!& i!%"rmati"! s,stems are "%te! the t""ls 'sed t" c"mmit "r c"er ' '!ethical behai"r. cc"'!ta!ts !eed t" be a#are "% the "ssibilit, "% %ra'd #ithi! the S s" that the, ca! hel deel" a!d imleme!t e%%ectie i!ter!al c"!tr"ls t" red'ce the ris "% s'ch '!ethical acts. ! additi"!* acc"'!ta!ts !eed t" be reared t" resist the temtati"! t" c"mmit '!ethical acts a!d t" a"id bei!& c"erced i!t" assisti!& #ith a %ra'd'le!t c"er-'. 45. (SO 9) 6elli Droyer is currently pursuing her accounting degree at Bromfeld 7ni%ersity. 8he has e&celled in each of her ma!or courses to date9 howe%er' she tends to struggle in her computer classes and with assignments re(uiring use of computer technology. 4e%ertheless' 6elli confidently claims that she will $ecome an e&cellent accountant. Comment on the practical and ethical implications of her position. Celli is mistae! i! her "siti"! %"r the %"ll"#i!& reas"!s racticall, seai!&* acc"'!ta!ts !eed t" be #ell-i!%"rmed ab"'t the "erati"! "% acc"'!ti!& i!%"rmati"! s,stems* #hich !earl, al#a,s i!"le c"m'ter tech!"l"&,. $he S is the %"'!dati"! "% m"st acc"'!ti!& %'!cti"!s* s" t" resist c"m'ter tech!"l"&, #"'ld be '!reas"!able* i% !"t im"ssible. ls"* i! "rder t" assist i! deel"i!& i!ter!al c"!tr"ls* acc"'!ta!ts m'st '!dersta!d the r"cesses #ithi! the S* i!cl'di!& the 'se "% tech!"l"&,* s" that e%%ectie c"!tr"ls ca! be deel"ed a!d imleme!ted t" red'ce riss. thicall, seai!&* acc"'!ta!ts !eed t" be #ell-i!%"rmed ab"'t the "erati"! "% the S s" that the, are "ised t" rec"&!ie %ra'd a!d err"rs that ma, "cc'r. With"'t a! '!dersta!di!& "% the '!derl,i!& tech!"l"&,* acc"'!ta!ts #"'ld be '!able t" e%%ectiel, cat're a!d m"!it"r b'si!ess r"cesses. =ather tha! %'l%illi!& her res"!sibilit, as a! acc"'!ta!t t" deel" a!d imleme!t i!ter!al c"!tr"ls* Cellis i&!"ra!ce "% the S c"'ld act'all, all"# %ra'd t" be eretrated #ith"'t bei!& ree!ted "r detected. "r these reas"!s* Cellis ie#"i!t is 'ite da!&er"'s. •
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#ro$lems 46.(SO 2) )f an accounting information system were entirely a manual system no computers used"' e&plain how data would $e captured' recorded' classified' summari/ed' and reported. Discuss how the sophistication of the company’s computer system impacts the accounting output and' alternati%ely' how the re(uirements for accounting outputs impact the design of the accounting information system . ! a ma!'al acc"'!ti!& i!%"rmati"! s,stem* data #"'ld be cat'red "! s"'rce d"c'me!ts a!d rec"rded b, ha!d i! s'bled&ers "r secial ;"'r!als. cc"'!t classi%icati"!s #"'ld be determi!ed b, the acc"'!ta!ts res"!sible %"r rec"rdi!& the tra!sacti"!. $he acc"'!ta!ts #"'ld er%"rm mathematical c"m'tati"!s t" s'mmarie the rec"rds a!d "st them t" a &e!eral led&er. $he &e!eral led&er #"'ld be ma!'all, s'mmaried at the e!d "% the eri"d s" that %i!a!cial stateme!ts c"'ld a&e 1-7
Chapter 1 Solutions
Introduction to AIS
be reared. $he %i!a!cial re"rts #"'ld be ma!'all, c"miled based "! the e!di!& &e!eral led&er bala!ces. Si!ce a &reat deal "% aer a!d h'ma! r"cessi!& are re'ired %"r a ma!'al s,stem* it is r"!e t" err"r. M"re s"histicated* c"m'terbased s,stems te!d t" r"d'ce m"re "'t't that is m"re acc'rate beca'se the, are r"&rammed t" r"cess data c"!siste!tl,. $he, als" 'se r"&rammi!& t" er%"rm mathematical c"m'tati"!s* #hich r"m"tes acc'rac, a!d time sai!&s. $here%"re* $ 'sa&e t" s'"rt b'si!ess r"cesses res'lts i! i!creased acc'rac,* i!creased e%%icie!c,* a!d red'ced c"sts. $he re'ireme!ts %"r acc"'!ti!& "'t'ts imact the desi&! "% the S. W"r stes #ithi! a b'si!ess r"cess ca! be desi&!ed t" cat're data i! a ma!!er that is c"!siste!t #ith the desired c"!te!t a!d %"rmat "% the related "'t't. $his r"m"tes e%%icie!c, a!d e%%ectie!ess "% the "erall r"cess. Whe! b'si!ess r"cess ree!&i!eeri!& is 'sed t" desi&! b'si!ess r"cesses* $ s,stems ca! be i!tr"d'ced t" tae ada!ta&e "% the seed a!d e%%icie!c, "% c"m'ters t" e!ha!ce the S. 47.(SO 1*3) Classify each of the following processes as either a re%enue process' e&penditure process' con%ersion process' or administrati%e process a. 8elling common stock to raise capital - +MBS$=$D $. urchasing electronic components to manufacture D:D players EB+$:= c. Mo%ing electronic components from the stockroom to the production floor to $egin making D:D players - FOBD=SOB d. aying employees at the end of a payroll period - EB+$:= e. reparing financial statements - +MBS$=$D f. 3ecei%ing cash payments from customers - =DB: g. Buying fi&ed assets - EB+$:= h. Mo%ing manufactured D:D players from the production floor to the warehouse FOBD=SOB
48.(SO 1) Business processes are composed of three common stages1 an initial e%ent' a $eginning' and an end. 0or items a through h listed in ro$lem ;<' identify the applica$le initial e%ent' $eginning' and end of the process . St'de!t res"!ses ma, ar, as their e/erie!ces are liel, t" be di%%ere!t. +i%%ere!t b'si!esses ma, hae di%%ere!t ee!ts that tri&&er these r"cesses h"#eer* the %"ll"#i!& are c"mm"! e/amles a. 8elling common stock to raise capital !itial e!t < F"!tacti!& a!d c"mm'!icati!& #ith i!est"rs e&i!!i!& < =eceii!& c"!siderati"! %r"m i!est"r !d < =ec"rdi!& tra!sacti"!s i! the acc"'!ti!& rec"rds. $. urchasing electronic components to manufacture D:D players !itial e!t < =eceii!& a 'rchase re'est %r"m "erati"!s ers"!!el e&i!!i!& < laci!& a! "rder #ith a s'lier !d < =ec"rdi!& the a,me!t %"r the c"m"!e!t arts. c. Mo%ing electronic components from the stockroom to the production floor to $egin making D:D players !itial e!t < =eceii!& a re'est %r"m the r"d'cti"! deartme!t %"r the m"eme!t "% materials e&i!!i!& < =em"i!&
a&e 1-8
Chapter 1 Solutions
d.
e. f. g. h.
Introduction to AIS
i!e!t"r, %r"m the st"cr""m !d < =ec"rdi!& the receit "% &""ds i! the r"d'cti"! area. aying employees at the end of a payroll period !itial e!t < =eceii!& a time sheet "r "ther rec"rd "% time #"red e&i!!i!& < =ec"rdi!& h"'rs i! the a,r"ll rec"rds !d < +istrib'ti!& a,checs "r de"siti!& a,checs i! eml",ee acc"'!ts. reparing financial statements !itial e!t < reari!& e!d-"%-eri"d ad;'sti!& e!tries e&i!!i!& < S'mmarii!& ad;'sted acc"'!t bala!ces !d < F"mili!& data i! %i!a!cial stateme!t %"rmat a!d #riti!& related discl"s're !"tes. 3ecei%ing cash payments from customers !itial e!t < F"mm'!icati!& #ith c'st"mer ab"'t a sale e&i!!i!& < B"ti%,i!& c'st"mer "% am"'!ts "#ed related t" the sale !d < =ec"rdi!& the receit "% cash a!d de"sit i! a ba! acc"'!t. Buying fi&ed assets !itial e!t < la!!i!& %"r a! e/e!dit're as art "% a caital b'd&eti!& r"cess e&i!!i!& < laci!& a! "rder %"r the %i/ed asset !d < =eceii!& the asset a!d rec"rdi!& it i! a s'bsidiar, led&er. Mo%ing manufactured D:D players from the production floor to the warehouse !itial e!t < =eceii!& !"ti%icati"! %r"m the r"d'cti"! deartme!t re&ardi!& c"mleti"! "% r"d'cts e&i!!i!& < =em"i!& %i!ished &""ds %r"m the r"d'cti"! %l""r !d < =ec"rdi!& the receit "% %i!ished &""ds i! the #areh"'se.
49. (SO 1*2*7) ,ach of the points listed ne&t represents an internal control that may $e implemented within a company’s accounting information system to reduce %arious risks. 0or each point' identify the appropriate $usiness process re%enue' e&penditure' con%ersion' administrati%e". )n addition' refer to the description of $usiness processes under 8tudy 2$!ecti%e = in the chapter' and identify the appropriate su$process. 8ome su$processes may $e used more than once' and others may not $e used at all." a. Customer credit must $e authori/ed $efore a $usiness transaction takes place. =ee!'e r"cess* sales s'br"cess $. #n authori/ed price list of goods for sale is pro%ided. =ee!'e r"cess* sales s'br"cess c. # shipping report is prepared for all shipments of goods so that customers may $e $illed in a timely manner. =ee!'e r"cess* sales s'br"cess d. #ccess to personnel files and paycheck records is a%aila$le only in accordance with management specifications. /e!dit're r"cess* a,r"ll s'br"cess e. 4ew %endors are re(uired to $e authori/ed $efore a $usiness transaction takes place. /e!dit're r"cess* 'rchasi!& s'br"cess f. #ccess to cash is restricted to those employees authori/ed $y management. =ee!'e "r /e!dit're r"cess* Fash c"llecti"! "r cash disb'rseme!t s'br"cess* resectiel, g. Costs of goods manufactured is properly summari/ed' classified' recorded' and reported. F"!ersi"! r"cess* res"'rce ma!a&eme!t s'br"cess h. #mounts due to %endors are reconciled $y comparing company records with statements recei%ed from the %endors. /e!dit're r"cess* cash disb'rseme!ts s'br"cess
a&e 1-9
Chapter 1 Solutions
Introduction to AIS
i. ,mployee wage rates and paycheck deductions must $e authori/ed $y management. /e!dit're r"cess* a,r"ll s'br"cess !. 8pecific procedures such as the performance of a $ackground check are carried out for all new employee hires. /e!dit're r"cess* a,r"ll s'br"cess k. *he purchasing manager is notified when stock le%els are low so that items may $e restocked to pre%ent $ackorders. F"!ersi"! r"cess* res"'rce ma!a&eme!t s'br"cess l. *wo signatures are re(uired on checks for payments in e&cess of >@@@. /e!dit're r"cess* cash disb'rseme!t s'br"cess m. When e&cess cash is on hand' the funds are in%ested in short-term securities. dmi!istratie r"cess* i!estme!t s'br"cess n. 5oods recei%ed are inspected' and any damaged or unmatched items are promptly communicated to the %endor. =ee!'e r"cess* sales s'br"cess o. *he monthly $ank statement is reconciled to the company’s cash records $y an outside accountant. =ee!'e "r /e!dit're r"cess* Fash c"llecti"! "r cash disb'rseme!t s'br"cess* resectiel,
50. (SO 3) 7sing an internet search engine' search for the terms A30)D and Asupply chain. ut $oth of these terms in your search and $e sure that Asupply chain is in (uotation marks. 3ead some of the resulting we$ sites you find and answer these (uestions a. What is 30)D? =adi"-%re'e!c, ide!ti%icati"! (=+) tech!"l"&, hels c"ma!ies ide!ti%, a!d ma!a&e lar&e l"ts "% &""ds* t,icall, receied a!d st"red i! cart"!s "r "! sids. $he cart"!s "r sids i!cl'de ta&s that are e!c"ded #ith ide!ti%,i!& i!%"rmati"! ab"'t the items* their s'lier* a!d their 'rchas e tra!sacti"!. $hese ta&s ca! be i!sta!tl, read a!d rec"rded b, the c"ma!, thr"'&h the 'se "% a!te!!ae "r batter,-"erated tra!smitters a!d radi" #aes. $. How is 30)D related to the supply chain? =+ e!ha!ces s'l, chai! ma!a&eme!t b, si&!i%ica!tl, red'ci!& the time re'ired t" rec"rd 'rchases a!d i!e!t"r, traci!&. $he i!sta!ta!e"'s readi!& "% =+ ta&s all"#s the items t" m"e s#i%tl, thr"'&h the l"&istics r"cess #ith i!creased seed a!d acc'rac, "% the '!derl,i!& rec"rds. c. How will 30)D impro%e the accuracy of data from the supply chain? cc'rac, is i!creased b, the 'se "% ta&s c"!tai!i!& c"ma!, a!d r"d'ct ide!ti%iers. $hese ta&s red'ce the ris "% rec"rdi!& items i! d'licate. $he, als" aid i! i!e!t"r, traci!& thr"'&h e!ha!ced sec'rit, "% r"d'cts bei!& m"ed bet#ee! l"cati"!s.
51. (SO 7) 5o to the C282 we$ site and locate the guidance on enterprise risk management. *he e&ecuti%e summary of the article A,nterprise 3isk Management )ntegrated 0ramework can $e downloaded at no cost. 3ead the sections titled A3oles and 3esponsi$ilities and A7se of this 3eport. Descri$e the roles that %arious parties should play in enterprise risk management . lth"'&h eer,"!e #ithi! a b'si!ess e!tit, has res"!sibilit, %"r its =M r"cesses* the chie% e/ec'tie "%%icer is 'ltimatel, res"!sible a!d m'st ass'me "#!ershi "% the r"cess. cc"rdi!&l,* the FO sh"'ld bri!& t"ðer e, ma!a&ers %r"m each %'!cti"!al area t" la!*
a&e 1-10
Chapter 1 Solutions
Introduction to AIS
imleme!t* a!d m"!it"r the r"cess. $he b"ard "% direct"rs sh"'ld r"ide !ecessar, "ersi&ht a!d mai!tai! c"!tact #ith t" ma!a&eme!t* i!ter!al a'dit"rs* a!d e/ter!al a'dit"rs re&ardi!& the =M r"cess. Other ma!a&ers sh"'ld s'"rt the "r&a!iati"!s hil"s"h,* r"m"te c"mlia!ce #ith its ris aetite* a!d ma!a&e riss #ithi! their areas "% res"!sibilit,. $he FO a!d i!ter!al a'dit"rs t,icall, hae a s'"rt r"le. /ter!al t" the b'si!ess "r&a!iati"!* three &r"'s are e, t" the e%%ectie 'se "% =M re&'lat"rs* r"%essi"!al "r&a!iati"!s* a!d ed'cat"rs. =e&'lat"rs are e/ected t" re%er t" the FOSO %rame#"r i! the deel"me!t "% e/ectati"!s as #ell as the c"!d'ct "% their e/ami!ati"!s %"r b'si!ess "r&a!iati"!s the, "ersee. r"%essi"!al "r&a!iati"!s sh"'ld c"!sider the FOSO %rame#"r i! the deel"me!t "% &'ideli!es %"r %i!a!cial ma!a&eme!t* a'diti!&* a!d related t"ics. d'cat"rs are 'r&ed t" i!c"r"rate the %rame#"r i!t" '!iersit, c'rric'la* as #ell as t" c"!d'ct research a!d a!al,sis "! "te!tial e!ha!ceme!ts t" the =M r"cess. 52.(SO 9) 7sing an internet search engine' search for the term in (uotations" Aearnings management. 0rom the items you read' answer the following (uestions a. )s earnings management always criminal? B"* ear!i!&s ma!a&eme!t is !"t al#a,s ille&al. Si!ce acc"'!ti!& ri!ciles all"# %"r s"me %le/ibilit,* acc"'!ta!ts ma, 'se the discreti"! at their dis"sal i! reari!& %i!a!cial stateme!ts. $. )s earnings management always unethical? B"* ear!i!&s ma!a&eme!t is !"t al#a,s '!ethical* d'e t" the materialit, c"!strai!t. Get ear!i!&s ma!a&eme!t bec"mes '!ethical #he! it ?cr"sses the li!e@ t" re%lect ma!a&eme!ts desires rather tha! a! acc'rate rerese!tati"! "% the c"ma!,s %i!a!cial er%"rma!ce. % ear!i!&s ma!a&eme!t deceies "r distracts i!est"rs* it is '!ethical. 53. (SO 9) 7sing an internet search engine' search for AHealth8outh and Afraud or A8crushy the name of the company’s C,2". ,&plain the fraud that occurred at Health8outh Corporation. What was the ultimate result of the prosecution of Health8outh officials? ealthS"'ths %ra'd #as a! elab"rate ear!i!&s ma!a&eme!t scheme #hereb, ear!i!&s #ere "erstated b, at least H1.4 billi"!. alse ree!'es #ere rec"rded #ith c"rres"!di!& decreases i! c"!tra-ree!'e acc"'!ts* e/e!ses* a!dI"r liabilities a!d i!creases i! assets. :ltimatel,* a%ter a l"!& a!d dramatic trial* Scr'sh, #as ac'itted "% all crimi!al char&es d'e t" lac "% eide!ce t,i!& him t" the %ra'd.
Cases 54. 5as-7p 5o Mart and the accounting information system. 1. cc"'!ti!& data is liel, t" be cat'red at >as-: J >" at the &as 'm i% the c'st"mer 'ses a debit card "r credit card t" a, %"r a &as 'rchase at the 'm. e! i% the c'st"mer ch""ses t" a, i!side* the i!%"rmati"! ertai!i!& t" the sale "% &as"li!e is rec"rded at the 'm. $he s!acs m'st be 'rchased i!side the st"re* b't ca! be added t" the &as"li!e char&e. $he acc"'!ti!& e%%ect is that the
a&e 1-11
Chapter 1 Solutions
2.
3.
4. 5.
Introduction to AIS
sale a!d the a,me!t c"llected sh"'ld i!crease the Sales acc"'!t a!d Fash "r cc"'!ts =eceiable* resectiel,. $he rec"rds that cat're the acc"'!ti!& data #"'ld be mai!tai!ed #ithi! the c"m'ter s,stem. lth"'&h a ma!'al r"cess is re'ired t" "erate the &as 'm a!d cash re&ister* the remai!der "% the s,stem is c"m'ter-based* s" the s,stem rec"rds the sale a!d all related data. !ter!al c"!tr"ls #"'ld i!cl'de the sec'rit, cameras i! the st"re a!d &as %illi!& area* as #ell as rec"!ciliati"! r"ced'res. Aie the Mc+"!alds e/amle* a ma!a&er is liel, t" cl"se a!d rec"!cile the cash re&ister a!d &as 'm sales at the e!d "% the da,. $he s'mmariati"! "% acc"'!ti!& data is liel, t" "cc'r at the e!d "% the eri"d #he! %i!a!cial re"rts are reared. $hese stes are r"babl, acc"mlished b, the c"m'ter s"%t#are. i!a!cial re"rti!& "cc'rs at the e!d "% the eri"d* as data are s'mmaried i!t" re"rts 'sed %"r i!ter!al a!d e/ter!al 'r"ses. $his liel, i!cl'des a c"mbi!ati"! "% ma!'al a!d c"m'teried r"cesses. $here are liel, t" be searate classi%icati"!s %"r the sales "% &as"li!e ers's s!ac items.
55. Business processes and )* ena$lement at fast food restaurants. St'de!t res"!ses ma, ar,* b't are liel, t" c"!siste!t #ith the %"ll"#i!& a. +ist and descri$e four different acti%ities that are manual parts of $usiness processes at a restaurant such as Wendy’s. Ma!'al r"cesses are re'ired t" &reet c'st"mers at the drie-thr"'&h #i!d"# "r c"'!ter e!ter c'st"mer "rders "! the cash re&ister t"'ch-scree!s reare the %""d &ather the c'st"mers "rder c"llect a,me!t %r"m the c'st"mer clea! the di!i!& area re%ill the c"!dime!t dise!sers* etc. rec"!cile the cash i! the cash re&ister t" am"'!ts i!cl'ded i! the sales s'mmaries $. +ist and descri$e four different acti%ities that are )* ena$led parts of $usiness processes at a restaurant such as Wendy’s. $ e!ables r"cesses are 'sed t" rec"rd c'st"mer "rders i!'t i! the cash re&isters. $he s,stem acc'm'lates sales data based "! the "rders tra!sacted reare sales am"'!ts based '"! the re-r"&rammed rices "% items "rdered a!d alicable ta/ rates determi!e the am"'!t "% cha!&e d'e t" c'st"mers based "! the am"'!t "% cash c"llected reare a sales receit '"! c"mleti"! "% a sales tra!sacti"! tra!s%er "rder details t" the %""d rearati"! stati"!s s" that the items ca! be reared a!d assembled reare a dail, s'mmar, %"r each cash re&ister at the e!d "% the shi%t • • • • • • • •
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56. Business processes at department stores. a&e 1-12
Chapter 1 Solutions
Introduction to AIS
a. Descri$e any necessary supporting processes that precede the sale of a product to you. S"me "% the s'"rti!& r"cesses that recede a sale t" a c'st"mer i!cl'de ac'iri!&* rici!& a!d disla, "% the mercha!dise* hiri!& a!d trai!i!& sales ers"!!el a!d cashiers* rearati"! "% cash re&ister dra#ers #ith ade'ate cha!&e* a!d r"&rammi!& the s,stem t" rec"&!ie the items #he! the, are read b, a bar c"de sca!!er. $. Descri$e any necessary supporting processes that occur after a sale to you. S"me "% the s'"rti!& r"cesses that "cc'r a%ter a sale t" a c'st"mer i!cl'de ha!dli!& c'st"mer ret'r!s* s'mmariati"! "% the sales data* rec"!cili!& the cash re&isters #ith the c"m'teried data %r"m the re&isters* rearati"! "% a ba! de"sit* eri"dic sales re"rti!&* a!d rec"!ciliati"! "% the ba! stateme!ts.
57. Business processes at Culpe’s Cues Co. a. What are the $usiness processes that apply to this $usiness? $he b'si!ess r"cesses described i!cl'de the e/e!dit're r"cess i!"led i! 'rchasi!& materials !eeded t" ma!'%act're ""l c'es a!d disb'rsi!& cash t" s'liers %"r materials 'rchased. $he case als" describes ree!'es r"cesses %"r sales "% ""l c'es "er the i!ter!et* c'st"mer c"llecti"!s* a!d sales ret'r!s (relaceme!ts). $his b'si!ess #"'ld als" i!cl'de s'br"cesses %"r a,r"ll e/e!dit'res t" a, Kames a!d =ebecca F'le %"r their time #"red* a!d %i/ed asset r"cesses t" ha!dle a!, caital assets ac'ired (s'ch the #"rsh"* "%%ice sace* %'r!it're a!d c"m'ters* t""ls a!d e'ime!t* delier, ehicle* etc.). ! additi"!* c"!ersi"! r"cesses #"'ld i!"le la!!i!& "% the ma!'%act'ri!& r"cess* la!!i!& a!d ma!a&i!& materials a!d res"'rces !eeded %"r r"d'cti"!* a!d l"&istics (m"eme!t "% the ma!'%act'red &""ds thr"'&h the r"d'cti"! r"cess thr"'&h delier, t" a c'st"mer). $. How would the $usiness processes change if Culpe’s Cues e&panded to a regional focus? % F'les F'es e/a!ded t" a re&i"!al %"c's* it is liel, that its b'si!ess #"'ld &r"#. Kames a!d =ebecca F'le ma, hae di%%ic'lt, ma!a&i!& a re&i"!al b'si!ess "! their "#!* s" the, #"'ld liel, !eed t" hire a!d trai! eml",ees t" ;"i! their b'si!ess. s m"re e"le became i!"led i! the b'si!ess r"cesses* the, #"'ld !eed t" determi!e h"# res"!sibilities #"'ld be diided a!d h"# t" imleme!t i!ter!al c"!tr"ls i! the r"cesses. Kames F'le ma, !" l"!&er be able t" ers"!all, ha!dle all delieries. $he c"ma!,s #ebsite ma, als" !eed t" be e!ha!ced t" ha!dle the additi"!al "l'me a!ticiated i! c"!!ecti"! #ith the b'si!ess e/a!si"!. c. How would the $usiness processes change if Culpe’s Cues $egan selling pool $alls and other $illiard e(uipment in addition to cues? % F'les F'es be&a! selli!& ""l balls a!d "ther billiard e'ime!t i! additi"! t" its ""l c'es* its b'si!ess r"cesses #"'ld cha!&e. % F'les ac'ired this t,e "% mercha!dise* it #"'ld hae t" e!ha!ce its e/e!dit'res r"cesses t" i!cl'de the t,es "% s'liers "% these billiard access"ries. t #"'ld als" !eed t" c"!sider the l"&istics "% i!e!t"r, st"ra&e. ! additi"!* its ree!'e r"cesses #"'ld !eed t" be e!ha!ced t" di%%ere!tiate sales "% ma!'%act'red c'es ers's "ther billiard mercha!dise. ts #ebsite #"'ld !eed t" be 'dated t" ha!dle the additi"!al r"d'ct li!es.
a&e 1-13
Chapter 1 Solutions
Introduction to AIS
a&e 1-14