AIS Homework for Chapter 12 12.2

AIS Homework for Chapter 12 12.2

What internal control procedure(s) would provide protection against the following threats? a) Theft of goods by the shipping dock workers, who claim that the inventory shortages reflect errors in the inventory records. Inventory associates job should include counting and documenting products as they leave inventory storage. Shipping personnel should be required to count and document receipt of goods from the finished goods storeroom to recognize responsibility for custody of the goods transferred by a signature. Then the company should reconcile the two lists daily. b) Posting the sales amount to the wrong customer account because a customer account number was incorrectly keyed into the system. The company should use an AIS system that has closed loop verification .The system could respond to the operator entering the account number by retrieving and displaying the customer’s name for the operator to review. If the transactions are being entered in batches, redundant data such as the first 5 characters of the customer’s name could be included in each input record; after finding a match on customer account number, the system would also verify that the name characters match before posting the transaction. A validity check would only tell you if a valid customer number was entered, not if the correct valid customer number was entered, therefore personnel should physically compare the data entered to customer account numbers. c) Making a credit sale to a customer who is already four months behind in making payments on his account. The company should work on having up-to date credit records that reflect information on customers credit daily and the company should create a credit accepting process that verify the customer’s credit history. Also payment history payment should be a determine factor of the credit accepting process as well. d) Authorizing a credit memo for a sales return when the goods were never actually returned. A receiving report should be required before a credit for sales returns is issued. The system should be configured to block issuance of credit memos without the required documentation that the goods have been returned. e) Writing off a customer’s accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer. This has the potential to occur if the same individual writes off accounts and processes cash payments. Therefore, the best control procedure is to separate the function of authorizing write-offs of uncollectible accounts from the function of handling collections on account…………………….

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