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13.12 Figure 13-11 depicts the basic activities performed in Lexsteel’s expenditure cycle.
The following additional information supplements that figure:
• Because of cash flow problems, Lexsteel always pays suppliers on the last
possible day before incurring a penalty for late payment. Supplier invoices are
processed and paid weekly. Every Friday, the accounts payable clerk reviews
and approves all invoices with a due date the following week.
• The purchasing manager reviews and approves all purchases prior to e-
mailing them to suppliers.
• After counting and inspecting incoming deliveries, the receiving clerk enters
the following information into the system:
o Quantities received for each inventory item
o Date and time received
o Supplier number
• After entering that information, the receiving clerk takes the inventory to the
inventory control department for storage.
• Access to the inventory control department is restricted.
• Inventory is only released to production when properly authorized request is
received. When the inventory is released, the inventory control clerk updates
the perpetual inventory system.
• Physical counts of inventory are taken every three months. Discrepancies
between the counts and recorded quantities on hand are investigated. Upon
resolution of the investigation, the plant manager authorizes adjustments to
the perpetual inventory records to change them to the amount actually on
hand.
Required
Identify at least three control weaknesses in Lexsteel’s expenditure cycle. For each
weakness, explain the threat and suggest how to change the procedures to mitigate that
threat.
1. Weakness: No timely resolution/follow-up if there are differences between quantities
order and received.
Problem 13.13 Excel Problem
Required: Download the spreadsheet for this problem from the course website and
perform the following tasks:
1. Explore Excel’s AutoFilter function.
a. At the bottom of the table, in cell C79 enter the words “Total (sum)” and
in cell D79 enter the SUM function to total all amounts in column D.
b. At the bottom of the table, in cell C80 enter the words “Total
(subtotal)”and in cell D80 enter “SUBTOTAL” function to sum all the
amounts in column D.
c. Use AutoFilter to display all purchases from suppliers in Zipcode
85110. What is displayed in cells D79 and D80? Why?
d. Repeat step 3 for Zipcodes 85111 and 85116. What is the value of using
the AutoFilter function?
2. Use the AutoFilter and Sort functions to identify the following warning signs of
potentially fraudulent supplier invoices:
a. Suppliers that have only initials for the name
b. Different suppliers with the same PO Box for an address
c. Suppliers who submit sequentially numbered invoices
d. Invoices just below a threshold requiring approval; for example,
invoices below $1,000
e. Duplicate invoice numbers from the same supplier
Solution steps for Problem 13.13
SUGGESTED ANSWERS TO THE CASES
CASE 13-1 RESEARCH PROJECT: IMPACT OF IT ON EXPENDITURE
CYCLE ACTIVITIES, THREATS, AND CONTROLS
Search popular business and technology magazines (Business Week, Forbes,
Fortune, CIO, etc.) to find an article about an innovative use of IT that can be used
to improve one or more activities in the expenditure cycle. Write a report that:
a. Explains how IT can be used to change expenditure cycle activities
Solutions will vary depending upon articles read.
b. Discusses the control implications. Refer to Table 13-2 and explain how the new
procedure changes the threats and appropriate control procedures for
mitigating those threats.
Be sure that the report adequately addresses the relevant issues from Table 13-2.
