BFA221 Accounting Information Systems

Student ID No: ________________________

Pages: 13

Sections: 4

UNIVERSITY OF TASMANIA

EXAMINATIONS FOR DEGREES AND DIPLOMAS

October 2018

BFA221 Accounting Information Systems

First and Only Paper

Ordinary Examination

Examiner: Stephen Allen

Time Allowed: THREE (3) hours

Reading Time: FIFTEEN (15) minutes

Instructions:

This examination consists of four sections, Sections A, B, C and D.

Section A consists of EIGHT (8) short answer questions of which students must answer any FOUR (4) questions.

Section B consists of THREE (3) compulsory case study questions.

Section C consists of EIGHT (8) terminology related short answer questions of which students must answer any FOUR (4) questions.

Section D consists of TWENTY (20) compulsory multiple choice questions.

This examination counts for 50 per cent of the marks for this unit.

SECTION ASHORT ANSWER QUESTIONS

Select any FOUR (4) of the following EIGHT (8) questions and in approximately half of a page of writing, answer the question asked.

Each question is worth 5 marks for a total of 20 marks.

1. How can an AIS help improve business decision making?

2. Explain the difference between file-oriented transaction processing systems and relational database systems.

3. Auditing an AIS effectively requires that an auditor have some knowledge of computers and their accounting applications. However, it may not be feasible for every auditor to be a computer expert. Discuss the extent to which auditors should possess computer expertise in order to be effective auditors.

4. What risks, if any, does offshore outsourcing of various information system functions pose to satisfying the principles of confidentiality and privacy?

5. Some people believe database technology may eliminate the need for double-entry accounting. This creates three possibilities: (1) the double entry model will be abandoned; (2) the double entry model will not be used directly, but an external-level schema based on the double entry model will be defined for accountants’ use; or (3) the double entry model will be retained in database systems. Which alternative do you think is most likely to occur? Why?

6. What input, edit and processing controls are needed to ensure that journal entries made by a treasurer/chief financial officer are accurate and complete?

7. What is a computer virus and how does it work?

8. What is ‘computer fraud’? Define and explain each category of computer fraud and give a relevant example of each.

[Section A: 20 marks]

SECTION BCASE STUDY QUESTIONS

Students must answer any ALL of the following THREE (3) questions. The mark allocation for each question is indicated.

This section has a total of 30 marks.

Question 1

The accounts payable process of Martin Pty Ltd is described in the narrative below and depicted in the document flowchart that follows.

Narrative of Martin Pty Ltd’s Accounts Payable Process

A copy of the purchase order is sent by the purchasing department to the Accounts Clerk, who files it in an open order file. The receiving department also forwards a copy of the receiving report to the accounts clerk, who files it with the purchase order, in the open order file. Suppliers then send the invoice and remittance advice to the Accounts Clerk, who then retrieves the corresponding purchase order and receiving report from the open orders file.

The three documents are then matched up and the details of the payable are entered into the computer, with the purchase order and accounts payable master data being updated. The details entered are displayed on the computer screen in front of the accounts clerk. Once payment invoice details have been entered, the computer will search the open order for any that are due and payable, preparing cheques for the invoices that are due and printing them out. The accounts payable master data and the cash payments data are updated for any cheques that are prepared.

The invoice, purchase order and receiving report are then forwarded to the Accounts Manager, who cross-checks their details with the amount and payee names on the cheques that the computer prepared. The cheques are then signed and forwarded on, along with the remittance advice, to the supplier. The invoice, purchase order and receiving report are forwarded to the Accounts Clerk who files the documents alphabetically in the Closed Orders file.

Flowchart of Martin Pty Ltd’s Accounts Payable Process

Required

1. Identify and describe three (3) risks that are present in the system.

[5 marks]

2. Identify any three (3) controls that are present in the case and explain their operation and the risks that they address.

[5 marks]

3. Identify three (3) risks that do not have relevant control activities and discuss the internal control activity that would be appropriate to address the risk.

[5 marks]

[Question 1 Total: 15 marks]

Question 2

In each of the following cases, identify and explain an input, output or processing control which would best mitigate (reduce) the threat. Note, you must identify whether an input, output, or processing control is needed, identify the control needed and explain it.

Case A

The hours-worked filed in a payroll transaction record contained the value 400 instead of 40. As a result, the employee received a pay cheque for $6,257.24 instead of $654.32.

Case B

A salesperson mistakenly entered an online order for 50 laser printers instead of 50 laser printer toner cartridges.

Case C

Two travelling 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 representatives 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 cancelled the sale and vowed to never again do business with the company.

Case D

A batch of 73 time sheets 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 paycheque.

Case E

During 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.

Required

In each of the cases, identify and explain an input, output or processing control which would best mitigate (reduce) the threat. Note, you must identify whether an input, output, or processing control is needed, identify the control needed and explain it.

[Question 2 Total = 5 x 2 marks: 10 marks]

Question 3

Martin Stephens has asked you to develop a document flowchart for the cash receipts system at M and S Trading Pty Ltd. Martin’s narrative of the system is as follows:

Customer payments include cash received at the time of purchase and payments received in the mail. At day’s end, the treasurer endorses all cheques and prepares a deposit slip for the cheques and the cash. A clerk deposits the cheques, cash and deposit slip at the local bank each day. When cheques are received as payment for accounts due, a remittance slip is included with the payment. Remittance slips are used to update the accounts receivable file at the end of the day. Remittance slips ae stored in a file drawer by date.

Every week, a cash receipts report and an aged trial balance are generated using the accounts receivable ledger. The cash receipts report is sent to management. A copy of the aged trial balance is sent to the credit and collections department.

Required

Prepare a document flowchart for the cash receipts system at M and S Trading Pty Ltd.

[Question 3 Total: 5 marks]

[Section B Total: 30 marks]

SECTION CTERMINOLOGY QUESTIONS

Select any FOUR (4) of the following EIGHT (8) questions and in approximately half of a page of writing, explain each term and distinguish between them. Please note: if your answer does not distinguish between the terms, you will receive less marks.

Each question is worth 5 marks for a total of 20 marks.

1. ‘Purchase requisition’ AND ‘Purchase order’

2. ‘Transaction file’ AND ‘master file’

3. ‘Picking ticket’ AND ‘bill of lading’

4. ‘Data flow diagram’ AND ‘document flowchart’

5. ‘Bank feed for Xero bank statement’ AND ‘CSV file upload for Xero bank statement’

6. ‘MRP-II’ AND ‘lean manufacturing’

7. ‘XBRL’ AND ‘balanced scorecard’

8. ‘Misappropriation of assets fraud’ AND ‘fraudulent financial reporting’