38 Solutions for Chapter 12
FIGURE SM-12.13 Problem 3, Part b Solution (Partial)—Systems Flowchart for the Receiving Process at Ludlow
Accounting Information Systems, 10e 39
P 12-4 ANS.
3. B: Employees, especially buyers such as Carol, should periodically sign the
organization’s written code of conduct to indicate, for example, that there is
no conflict of interest between their responsibilities and their own financial
interests.
4. E: There should be a PO on file, created by a person not in logistics, which is
used to authorize the receipts.
5. G: A process is needed to review and approve vendors to determine that they
can deliver goods with prices that Form, Inc. is willing to pay on an ongoing
basis. Then the vendor record should be created by someone who will not be
executing purchases from that vendor (i.e., independent vendor master data
maintenance).
Note: We could also argue for a process to create vendors for one-time purchases
in which vendors are automatically deleted after being used for “emergency”
purchases.
6. J: There should be a segregation of logistics between warehouse and
receiving. Steve, who works in the warehouse, should not also work in
receiving and be able to execute a goods receipt.
40 Solutions for Chapter 12
8. C: Before a PO is issued, buyers should research vendors to determine that
they can provide goods in a timely manner (i.e., review for availability).
Note: Monitoring open POs (option D) would also be correct here but is needed
for item 10.
10. D: Deltona Company should review open POs to determine whether the goods
have been received. Goods that have been received and are on the shelf should
be recorded as received. This will close the PO.
Accounting Information Systems, 10e 41
Control Goals of the Purchasing Business Process
Control Goals of the Operations Process
Control Goals of the Information Process
Ensure
effectiveness of
operations
Ensure
efficient
employment
of resources
(people and
computers)
For purchase
requisition inputs,
ensure:
For
purchase
order
master
data,
ensure:
For vendor packing
slip inputs, ensure:
For
purchase
order
master data,
ensure:
Recommended
control plans
A
B
C
IV
IC
IA
UC
UA
IV
IC
IA
UC
UA
Present controls
P-1: Preformatted
screens
P-1
P-1
P-5: Populate input
screens with
master data
P-5
P-5
P-5
in receiving
P-7
P-3
P-3
rejected inputs
P-4
42 Solutions for Chapter 12
Control Goals of the Purchasing Business Process
Control Goals of the Operations Process
Control Goals of the Information Process
Ensure
effectiveness of
operations
Ensure
efficient
employment
of resources
(people and
computers)
For purchase
requisition inputs,
ensure:
For
purchase
order
master
data,
ensure:
For vendor packing
slip inputs, ensure:
For
purchase
order
master data,
ensure:
Recommended
control plans
A
B
C
IV
IC
IA
UC
UA
IV
IC
IA
UC
UA
Missing controls
FIGURE SM-12.14 Problem 5 Solution (Partial)—Control Matrix
Accounting Information Systems, 10e 43
Exhibit SM-12.3 Problem 5 Solution (Partial)—Explanation of Cell Entries for Control
Matrix in Figure SM-12.14
P-1: Preformatted screens.
Efficient employment of resources: By structuring the data entry process,
automatically populating fields, and preventing errors, preformatted screens
simplify data input and save time, allowing a user to input more data over a period
of time.
P-2: Online prompting.
P-3: Programmed edit checks.
Efficient employment of resources: Purchase requisition data can be processed on
a timelier basis and at a lower cost if errors are detected and prevented from
(e.g., unreasonable purchase quantity) and reduce input errors.
P-4: Procedures for rejected inputs.
Purchase requisition input completeness and input accuracy: The rejection
P-5: Populate input screens with master data.
Efficient employment of resources: Automatic population of inputs with vendor
master data results in fewer keystrokes, which should improve the speed and
productivity of the purchasing personnel.
44 Solutions for Chapter 12
Purchase requisition input accuracy: Fewer keystrokes and the use of data called
up from existing records reduce the possibility of input errors.
P-6: Digital signature.
Security of resources and purchase requisition input validity: Digital signatures
P-7: Enter receipt data in receiving.
Efficient employment of resources: Because receiving personnel are familiar with
the data being entered, they can more readily correct these errors if they occur.
Security of resources: Because the receipt data is captured in receiving, there is
less opportunity to divert the receipts, since there is a record that the inventory
exists and is on the premises.
P-8: Confirm input acceptance.
Packing slip input completeness: By advising receiving personnel that input has
been accepted, this confirmation helps ensure input completeness.
Accounting Information Systems, 10e 45
46 Solutions for Chapter 12
FIGURE SM-12.15 Problem 5 Solution (Partial)—Annotated Systems Flowchart (continued)
Accounting Information Systems, 9e 47
Inventory
managem ent
process
Inventory’s
purchase
requisition
Accounts
payable
process
PO
accounts
payable
notification
Vendor
Purchase
order
PO
receiving
notification
Inventory
master data
Order goods
and services
Inventory
master data
Purchase order
master data
Receiving
report
Vendor
master data
Purchasing process — Level 0 diagram
With changes for receiving a technical product.
FIGURE SM-12.16 Problem 6 Solution
48 Solutions for Chapter 12
FIGURE SM-12.16 Problem 6 Solution (continued)
Quality
control
3.1
Inspect
and count
goods
Compare
receiving
report and
purchase order
Vendor
master data
Inventory
master data
PO receiving
notification
PO, packing slip,
Stock
notice
Purchasing process –– Diagram 3
With changes for receiving a technical product
Purchase
receipts data
GL
Inventory
received
Reject
Accounting Information Systems, 9e 49
Purchasing
process
Various
departm ents
Purchase requisition-
supplies and services
PO
departm ent
notification
PO
accounts
payable
notification
Receiving
report
Receipt
notification
General
ledger
process
received update
Purchasing process — context diagram
w ith changes for drop shipm ent. Changes are:
— No packing slip is received from the vendor
—The custom er sends a receipt notification (this could
come from the carrier that delivered the goods to
the custom er).
—There is no stock notice going to the w arehouse.
FIGURE SM-12.17 Problem 7 Solution
50 Solutions for Chapter 12
notification
PO
accounts
payable
Vendor
Purchase
order
PO
receiving
2.0
Order goods
and services
Inventory
master data
Vendor
master data
Purchasing process –– level 0 diagram
With changes for drop shipment. Changes are:
— No packing slip is received from the vendor
—The customer sends a receipt notification (this could
come from the carrier that delivered the goods to
the custom er).
—There is no stock notice going to the w arehouse.
FIGURE SM-12.17 Problem 7 Solution (continued)
Accounting Information Systems, 9e 51
Purchase order
maste r data
Receiving
report
Reject
Purchasing process –– Diagram 3
With changes for drop shipment. Changes include:
–-The packing slip from the ve ndor has been replaced by the
receipt notification from the customer (or carrier).
–-There is no stock notice coming from bubble 3.2 because the
goods do not go to the warehouse.
FIGURE SM-12.17 Problem 7 Solution (continued)
52 Solutions for Chapter 12
Process
Subsidiary Functions
Inputs
Outputs
1.0 Determine requirements
1.1 Accumulate requests
Inventory’s purchase requisition
Purchase requisition—supplies and
services
Purchase requisition data
2.2 Prepare purchase order
Purchase requisition
Inventory master data
PO department notification
PO inventory notification
PO accounts payable notification
PO receiving notification
Purchase order
Accounting Information Systems, 9e 53
Process
Subsidiary Functions
Inputs
Outputs
3.2 Compare receiving report
and purchase order
Receiving report
Purchase order master data
Vendor master data
Inventory master data
Receiving report
Stock notice
Purchase order master data
Vendor master data
Table SM-12.1 Problem 8 Solution—Summary of Processes, Inputs, Outputs, and Data for Purchasing Process
54 Solutions for Chapter 12
P 12-9
ANS. Solutions will vary according to the tables selected. However, the following guidelines
should be helpful for grading the solutions:
1. From the file, ensure that the tables are linked in relationships with cardinalities.
2. For the Visio/documentation software diagram, ensure that the symbols used are correct
and the cardinalities are shown.
3. From the printouts, ensure that the tables are populated with three or more records and
P 12-10
ANS. Solutions will vary according to the organization selected. However, the following
guidelines should be helpful for grading the solutions:
1. The description should include the company, where it is located, the industry, and the
mechanics of the fraud. We might expect the fraud to include one of the following items
a. conflict of interest with the vendor (such as ownership)