Description
Your Name
Instructions:
Put your name at the top of this document and save it as yourlastname_firstinitial.docx. Use the
following table to answer Questions 1 through 3. The table will expand to accommodate as
many lines as you may need. When you are done with your analysis, submit your document to
Canvas. Be sure to submit by the due date and time.
IMPORTANT: By submitting this document, you attest that it represents your own
individual work without outside assistance.
Process
1.
2.
…
Answer to Question 4
Threat
Internal Controls
By submitting your answers to this quiz, you attest that the submission is yours and
yours alone – that you have not received outside assistance or accessed unauthorized
reference materials from the textbook, the internet, or any other source.
Instructions
Use the attached Word document template to submit your answer to the case study.
Submission Document.docx
Actions
. Answer Questions 1 through 3 using the table. The table will expand to accommodate
as many lines as you may need. The following is an example only.
Example
Process
Threat
Internal Controls
1. example process
something bad could
happen
this control will mitigate the
threat/risk
– this bad thing could
happen
this/these control(s) will mitigate the
first threat/risk
– this other bad thing
could happen
this/these control(s) will mitigate the
second threat/risk
2. another process
… and so on
Use paragraphs with bullet points to answer
Question 4.
•
•
a paragraph with my answers to question 4
another paragraph to answer question 4
You will have 120 minutes to complete the case study.
Grading Parameters:
•
•
•
•
Answered the questions accurately, thoroughly, and completely.
Assigned the correct controls to the correctly identified threats.
Answers reflect your own individual solutions.
Submitted on time and in the correct form.
Read the following case study and answer the questions at the end of the case.
Hollywood Retailers, Inc. is a mid-sized privately-owned company on the east coast. The
corporation is 10 years old and uses an integrated ERP system. The administrative
offices are located in a downtown building and the production, shipping, and receiving
departments are housed in a renovated warehouse a few blocks away.
The company maintains a perpetual inventory system.
Employees in any department can enter purchase requests for items they note as being
either out of stock or in small quantity.
Each day, employees in the purchasing department process all purchase requests from
the prior day. To the extent possible, requests for items available from the same supplier
are combined into one larger purchase order in order to obtain volume discounts.
Purchasing agents use the Internet to compare prices in order to select suppliers. If an
Internet search discovers a potential new supplier, the purchasing agent enters the
relevant information in the system, thereby adding the supplier to the approved supplier
list. EDI is used to transmit purchase orders to most suppliers, but paper purchase
orders are printed and mailed to suppliers who are not EDI capable.
Receiving department employees check the system to verify existence of a purchase
order prior to accepting delivery, but sometimes during rush periods they unload trucks
and place the items in a corner of the warehouse where they sit until there is time to use
the system to retrieve the relevant purchase order. In such cases, if no purchase order is
found, the receiving employee contacts the supplier to arrange for the goods to be
returned.
Receiving department employees compare the quantity delivered to the quantity
indicated on the purchase order. Whenever a discrepancy is greater than 5%, the
receiving employee sends an email to the purchasing department manager. The
receiving employee uses an online terminal to enter the quantity received before
moving the material to the inventory stores department.
Inventory is stored in a locked room. During normal business hours an inventory
employee allows any employee wearing an identification badge to enter the storeroom
and remove needed items. The inventory storeroom employee counts the quantity
removed and enters that information in an online terminal located in the storeroom.
Occasionally, special items are ordered that are not regularly kept as part of inventory,
from a specialty supplier who will not be used for any regular purchases. In these cases,
an accounts payable clerk creates a one-time supplier record.
All supplier invoices (both regular and one-time) are routed to accounts payable for
review and approval.
Each Friday, approved supplier invoices that are due within the next week are routed to
the treasurer’s department for payment either electronically or via paper checks. Checks
are printed on a dedicated printer located in the treasurer’s department, using special
stock paper that is stored in a locked cabinet accessible only to the treasurer and
cashier. The paper checks are sent to accounts payable to be mailed to suppliers.
Monthly, the treasurer reconciles the bank statements.
Questions to Answer:
1.
2.
3.
4.
List the various processes within Hollywood’s expenditure process.
What are the inherent risks (threats) to these processes?
What internal controls mitigate the identified risks?
Identify at least three(3) weaknesses in Hollywood’s expenditure cycle
procedures, explain the associated problem and propose a solution.
Submission Requirements:
A Word document has been provided for you to use to submit the answers to this case
study. Use that submission document for your answers, put your name at the top of it,
and save it as yourlastname_firstinitial.docx. Use the table to answer Questions 1
through 3. The table will expand to accommodate as many lines as you may need.
Process
Threat
Internal Controls
Use paragraphs with bullet points to answer Question 4.
Submit your document by the due date/time by attaching it here and submitting the
assessment.
Grading Parameters:
•
•
•
•
Answered the questions accurately, thoroughly, and completely.
Assigned the correct controls to the correctly identified risks.
Answers reflect your own individual work.
Submitted on time and in the correct form.
Your Name
Instructions:
Put your name at the top of this document and save it as yourlastname_firstinitial.docx. Use the
following table to answer Questions 1 through 3. The table will expand to accommodate as
many lines as you may need. When you are done with your analysis, submit your document to
Canvas. Be sure to submit by the due date and time.
IMPORTANT: By submitting this document, you attest that it represents your own
individual work without outside assistance.
Process
1.
2.
…
Answer to Question 4
Threat
Internal Controls
Complete the following table by entering the controls to the right of the threats that they
mitigate. Submit your completed table by the due date.
Which control(s) would best mitigate the following threats?
Threats
Control(s)
a. The hours worked field in a payroll
Matching the transaction record with its source
transaction record contained the value 400
while paying the employee to avoid such errors
instead of 40. As a result, the employee received causing overpayment to employees.
a paycheck of $6,257.24 instead of $654.32.
b. The accounts receivable file was destroyed
because it was accidentally used to update
accounts payable.
Always make an updated backup file for
accounts receivables so that if one file is
destroyed the other can be used.
c. During the processing of customer payments,
the digit 0 in a payment of $204 was mistakenly
typed as the letter “O.” As a result, the
transaction was not processed correctly and the
customer erroneously received a letter that the
account was delinquent.
d. A salesperson mistakenly entered an online
order for 50 laser printers instead of 50 laser
printer toner cartridges.
Double checking the typo errors in payment
processing before sending letters to a customer
to avoid declaring a faithful customer as
delinquent.
e. A 20-minute power brownout caused a
mission-critical database server to crash,
shutting down operations temporarily.
f. A fire destroyed the data center, including all
backup copies of the accounts receivable files.
g. After processing sales transactions, the
inventory report showed a negative quantity on
hand for several items.
h. A customer order for an important part did
not include the customer’s address.
Consequently, the order was not shipped on
time and the customer called to complain.
i. When entering a large credit sale, the clerk
typed in the customer’s account number as
45982 instead of 45892. That account number
did not exist. The mistake was not caught until
later in the week when the weekly billing
process was run. Consequently, the customer
Add additional personnel to the process to
double-check the online order entries of the
salesperson by matching them with the online
orders.
Always intimating for the power cut before time
to save the server from crashing to avoid delays
in operations.
The backup copies should be held at a separate
location from that of the original receivable
files. So that an undesired incident like fire
could not destroy the backup copy.
Regularly doing inventory counts to avoid
discrepancies between the actual inventory and
inventory on record.
Regularly updating the customer’s details to
ensure that the record is complete in all aspects.
The company should program a system that
prohibits entering a non-existing customer’s
account number.
was not billed for another week, delaying
receipt of payment.
j. A visitor to the company’s Web site entered
400 characters into the five-digit Zip code field,
causing the server to crash.
k. Two traveling sales representatives accessed
the parts database at the same time.
Salesperson A noted that there were still 55
units of part 723 available and entered an order
for 45 of them. While salesperson A was keying
in the order, salesperson B, in another state,
also noted the availability of 55 units for part
723 and entered an order for 33 of them. Both
sales reps promised their customer next-day
delivery. Salesperson A’s customer, however,
learned the next day that the part would have to
be back-ordered. The customer canceled the
sale and vowed to never again do business with
the company.
l. The warranty department manager was upset
because special discount coupons were mailed
to every customer who had purchased the
product within the past 3 years, instead of to
only those customers who had purchased the
product within the past 3 months.
m. The clerk entering details about a large
credit sale mistakenly typed in a nonexistent
account number. Consequently, the company
never received payment for the items.
n. A customer filled in the wrong account
number on the portion of the invoice being
returned with payment. Consequently, the
payment was credited to another customer’s
account.
o. A batch of 73 timesheets was sent to the
payroll department for weekly processing.
Somehow, one of the time sheets did not get
processed. The mistake was not caught until
payday when one employee complained about
not receiving a paycheck.
p. Sunspot activity resulted in the loss of some
data being sent to the regional office. The
problem was not discovered until several days
later when managers attempted to query the
database for that information.
The zip code field should be programmed to
limit the entered characters to five digits only.
The system should be programmed to update
immediately after the entry of a sales order and
should also prohibit the simultaneous entry of a
sales order.
Sales representatives should promise the
customer after entering the sales order in the
system to avoid any false commitment regarding
the delivery of the product.
The list of customers should be checked by
another employee before mailing the coupons to
avoid such errors.
The company should program a system that
prohibits entering a non-existing customer’s
account number.
Matching the customer account number on the
returned invoices with the original sales order
delivered to the customer before entering the
payment into records.
Have additional checks to match the processed
time sheets with the received time sheets to
avoid such mistakes in the future.
Always double-check the data sent immediately
to timely discover the loss of data.
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