UNIVERSITY OF TASMANIA
EXAMINATIONS FOR DEGREES AND DIPLOMAS
Semester 2, 2017
BFA221 Accounting Information Systems
First and Only Paper
Examiner: Dr Gail Ridley
Time Allowed: THREE (3) hours
Reading Time: FIFTEEN (15) minutes
Instructions:
- Write your student number clearly at the top of this examination paper.
- Answer ALL questions.
- Question 3 offers some choices within it.
- Start your answer to each of the questions on a NEW page of your examination booklet.
- When you have finished the examination, place the examination paper inside your examination answer booklet. Do not remove any part of the examination paper from the examination room.
Question 1
Read the case study below and consider Figure 1. Then answer the two questions beneath the case study.
Myson and Son is a small family owned store that sells smaller furniture items, like chairs, side tables, small bookcases and similar. Both the older Mr Myson and Harry had worked in the business until the end of 2016. However Harry Myson took over the business from his father at the start of 2017, which allowed his father to retire 45 years after he started the store in Geelong, Victoria. Harry was the first member of the Myson family to complete a degree. He recognised that the business was old-fashioned, and Harry was determined to modernise its processes, and maximise profit.
Harry had started to advertise all the goods on the internet through a new website that he had commissioned. He came to an arrangement with a transport business, also in Geelong, which transported the goods throughout the Victorian region, with the costs being paid by the purchaser. It was still possible to buy goods on credit, but Harry had arranged a wider pool of suppliers, so there was a greater range, and the furniture was more stylish.
Harry’s father had kept thorough financial records when he ran the business, using the skills he had gained from a book-keeping course at technical college. Harry took over those records from January 1, 2017, and drew upon his business degree. Although Mr Myson had retired, it was hard for him to let go of the business. He dropped into the store most weeks, and when he did, he looked through the accounts.
Each week during his visit to the store from the end of March 2017, Mr Myson spoke about the increasing number of overdue credit payments with his son. The number of overdue debtors increased steadily during 2017, and quantity of bad debt carried had increased in comparison to 2016 when Mr Myson ran the business.
Assume that you have been called in by Mr Myson to review the sales order process to identify any control weaknesses with Harry’s changed processes.
Required
a Review the case study above, and Figure 1 below. Discuss any weaknesses in the sales order process, explaining how they will impact on the business.
As a guide, write about a page.
[12 marks]
b Explain how the weaknesses you identified in the sales order process can be strengthened. Comment on whether the improvement/s you recommend will address Mr Myson’s concerns about the business.
As a guide, write about one page.
[12 marks]
c Explain what kind of model appears in Figure 1, along with the strengths and weaknesses of that kind of model for representing an accounting information system.
As a guide, write about a half-page.
[6 marks]
[Total for Question 1 = 30 marks]
1.1 Receive order
Customer
Customer
Orders
Acknowledgement
Approved orders
Response
Queries
1.2 Check inventory available
Customer
1.3
Respond to customer queries
Inventory
Sales order
Back
orders
Sales
order
Sales
order
Picking ticket
Purchasing
Ware-house
Billing
Shipping
Figure 1 Sales order entry system.
Case study adapted from Romney, M. and Steinbart, P. (2012) Accounting Information Systems, 12th Global Edition, Pearson, Harlow, England.
Question 2
Modifying information, performing data analysis and ensuring that adequate internal controls are in place, are all part of any Accounting Information System (AIS). These processes facilitate management decision making. One of the roles of an accountant is to provide management with useful information.
From an accountant’s perspective, consider the information and data analyis processes, and controls, below, and answer the related questions.
Required
- Most accountants interact with databases through data entry, data processing, querying or auditing. Explain the benefits of databases to organisations. What role can accountants play to ensure database integrity?
As a guide, write about one-half of a page.
[5 marks]
- Many companies outsource all, or some, of their information systems to third party specialists. While outsourcing offers many benefits, including allowing companies to focus on what they do best, and often lowering costs, it also comes with a range of disadvantages and risks. Discuss the main disadvantages and risks of outsourcing a company’s information systems, explaining why it is relevant for accountants to be aware of these.
As a guide, write about one-half of a page.
[5 marks]
c As experts in internal control, accountants are interested in how fraud is carried out in companies. Fraud may be undertaken by both employee and manager groups. Explain how the characteristics of fraud as carried out by each of these two groups differ, and how the motivation for fraud varies for the two groups. What recommendations would you suggest to prevent each of these two kinds of fraud in a company in which you worked?
As a guide, write about a page.
[10 marks]
d The use of eXtensible Business Reporting Language (XBRL) has become influential for fast and efficient communication of business information. Use of XBRL for transfer of financial information is compulsory for some circumstances in many nations, including in the UK, the US, Singapore and Spain. While the Australian Government invited comment in 2012-2013 on XBRL, its use is not mandatory in Australia.
Assume you are an accountant from a nation where use of XBRL is required under some circumstances, and that you have recently found work as an accountant in a large Australian company. Explain to your accountant colleagues what XBRL is, and its advantages and disadvantages for the company from an accountant’s perspective.
As a guide, write about a page.
[10 marks]
[Total for Question 2 = 30 marks]
Question 3
Some common accounting information systems (AIS)-related terms and approaches are presented below. Choose four of the pairs. For each pair, illustrate how these terms and approaches are used in AIS. Your answer must clearly illustrate the differences and similarities between the chosen terms and approaches. Note that for some pairs, there may be more similarities than differences, or the reverse.
As a guide, write a total of around half a page for each of the four (4) pairs considered.
- Lapping and kiting
- MRP-II and lean manufacturing
- Symmetric and asymmetric encryption
- Social engineering and botnets
- Purchase order and purchase requisition
- ERP and the REA model
- COBIT and business processes
[5 marks each]
[Total for Question 3 = 20 marks]
Question 4
Answer all of the following three subquestions. For each, explain the organisational policies or procedures that you recommend to prevent each activity from taking place. Also classify each control you recommend as whether a preventative, detective or a corrective control.
a A clerk in the human resources section of a company creates a fictious employee in the personnel computer file. The business still uses cheques to pay salaries and wages. When the payroll cheque for the fictious employee is received for distribution, the clerk takes it and cashes it.
As a guide, write about one half-page.
[7 marks]
b A vendor employee forwards an invoice for $476 of packing materials to a large company that manufactures fragile components, but without sending the packing materials. The company is accustomed to receiving invoices from the vendor and makes the payment, which is intercepted by the same vendor employee for their own gain.
As a guide, write about one half-page.
[7 marks]
c A hacker is able to gain access to a company’s computer system by guessing the password of his neighbour – Gertrude, the name of his neighbour’s dog.
As a guide, write about one half-page.
[6 marks]
[Total for Question 4 = 20 marks]