|
|
|
|
|
AIS822S - ACCOUNTING INFORMATION SYSTEMS - 2ND OPP - JAN 2020 |
|
|
1 Pages 1-10 |
▲back to top |
|
|
1.1 Page 1 |
▲back to top |
#
NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
Faculty of Computing and Informatics
Department of Informatics
QUALIFICATION : POSTGRADUATE CERTIFICATE IN INFORMATICS (INFORMATION SYSTEMS AUDIT)
QUALIFICATION CODE: O8PGCl
COURSE: ACCOUNTING INFORMATION SYSTEMS
LEVEL: 8
COURSE CODE: AIS822S
DATE: JANUARY 2020
PAPER: THEORY
DURATION: 3 Hours
MARKS: 100
SECOND OPPORTUNITY/SUPPLEMENTARY EXAMINATION QUESTION PAPER
EXAMINER(S)
Mr Munyaradzi Maravanyika
MODERATOR:
Ms Valerie Garises
INSTRUCTIONS
Answer ALL the questions.
Write clearly and neatly.
Number the answers clearly.
Do not use additional materials
Cross out any work which should not be marked.
No pencil work allowed except for diagrams where requested.
THIS QUESTION PAPER CONSISTS OF 3 PAGES
(Excluding this front page)
|
|
1.2 Page 2 |
▲back to top |
Case Scenario
Read the following case carefully and use it to answer Section A of this paper.
Namib CC., has the following processes related to purchasing:
When it is determined that an item should be ordered, the purchasing department prepares a
three - copy PO. The first copy is mailed to the vendor, the second copy is filed by PO number in the
purchasing department, and the third copy is forwarded to inventory control. Inventory control
updates the inventory ledger with the quantities that were ordered and files the PO copy by date.
When ordered items arrive at the receiving dock, the packing slip is inspected and a two - copy
receiving report is prepared. The first copy is forwarded to the purchasing department, where it is
filed with the PO. The second copy is filed in the receiving department by date. The packing slip is
forwarded to the accounts payable department.
Suppliers mail invoices directly to the accounts payable department. The accounts payable
department reviews the invoice and related packing slip, prepares a cash disbursement voucher,
updates the accounts payable ledger, and files the invoice by date. The cash disbursement voucher
is forwarded to the cash disbursements department.
The packing slip is returned to the receiving department. The cash disbursements department prepares
a two - copy check, mails the first copy to the vendor, and forwards the second copy to the general
ledger department. The cash disbursement voucher is forwarded to the accounts payable department
where it is filed with the invoice.
The general ledger department updates the general ledger accounts, using the second copy of the
check, and then forwards the check copy to cash disbursements to be filed by check number.
SECTION A: CASE STUDY QUESTIONS
[60 MARKS]
Question 1
[10 marks]
Prepare a process diagram of the first three paragraphs of Namib CC. processes scenario (the bold
section).
Question 2
[5 marks]
Explain how using a group coding scheme to design the supplier number may benefit Namib CC. in terms
of effectiveness and efficiency of its internal processes.
Question 3
[15 marks]
Discuss the concept of internal computer fraud and how internal computer fraud may be perpetrated
within Namib CC. using input manipulation, program manipulation and output manipulation.
|
|
1.3 Page 3 |
▲back to top |
Question 4
[10 marks]
Explain why an enforced code of ethics may have more impact in deterring upper-level management fraud
than the implementation of internal controls.
Question 5
[20 marks]
Identify any weaknesses in internal controls within the purchase processes of Namib CC. and indicate the
improvements you would suggest.
SECTION B: STRUCTURED QUESTIONS
[40 MARKS]
Question 6
[15 marks]
A manger suspects that certain employees are ordering merchandise for themselves over the Internet
without recording the purchase or receipt of the merchandise. When vendor’s invoices arrive, one of the
employees approves the invoices for payment. After the invoices are paid, the employee destroys the
invoices and related vouchers. The manager has been advised it would be best to begin tracing from the
cash disbursements to trace whether this is actually happening. Do you agree with this advice? Support
your answer.
Question 7
[25 marks]
Ozongejama Engineering Corp (OEC) operates in five SADC countries. OEC faced a crucial decision:
choosing network software that would maximize functionality, manageability, and end-user acceptance
of the system. OEC developed and followed a four-step approach:
Step 1.
Develop evaluation criteria. OEC organised a committee that interviewed users and developed the
following evaluation criteria:
- Ease of use
- Scope of vendor support
- Ease of network management and administration
- Cost, speed, and performance
- Ability to access other computing platforms
- Security and control
- Fault tolerance and recovery abilities
- Ability to connect workstations to the network
- Global naming services
- Upgrade and enhancement options
- Vendor stability
OEC organized the criteria into the following four categories and prioritized them. Criteria vital to short-
term and long-term business goals were given a 5. “Wish list” criteria were weighted a 3. Inapplicable
criteria were given a 1.
1. Business criteria: overall business, economic, and competitive issues
2. Operational criteria: tactical issues and operating characteristics
3. Organizational criteria: networks’ impact on the information systems structure
|
|
1.4 Page 4 |
▲back to top |
4. Technical criteria: hardware, software, and communications issues
Step 2.
Define the operating environment. Several data-gathering techniques were used to collect information
from which an information systems model was developed. The model revealed the need to share
accounting, sales, marketing, and engineering data at three organizational levels: district, division, and
home office. District offices needed access to centralized financial information to handle payroll. OEC
needed a distributed network that allowed users throughout the organization to access company data.
Step 3.
Identify operating alternatives. Using the criteria from step 1, committee members evaluated each
package and then compared notes during a roundtable discussion.
Step 4.
Test the software. The highest-scoring products were tested, and the product that fit the organization’s
needs the best was selected.
a. Discuss the committee’s role in the selection process.
[5]
b. What are the pros and cons of using a committee to make the selection?
[5]
c. What data-gathering techniques could WEC use to assess user needs and select a supplier?
[5]
d. What is the benefit of analysing the operating environment before selecting the software?
[5]
e. Justify whether a purchase decision be made on the point scoring process alone?
[5]
End of question paper
|
|
1.5 Page 5 |
▲back to top |
NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
FACULTY OF COMPUTING AND INFORMATICS
DEPARTMENT OF INFORMATICS
QUALIFICATION CODE: O08PGCl
“COURSE CODE: AIS8225 _
SESSION:
JANUARY 2020
DURATION:
3 HOURS
| LEVEL: 8
| COURSE NAME: ACCOUNTING INFORMATION SYSTEMS
| PAPER:
THEORY
| MARKS:
100
| EXAMINER(S)
mOnedon
MS VALERIE GARISES
INSTRUCTIONS
Please use the memorandum or sample solutions to guide your marking.
Use the marks allocated as a guide to mark
3. Reasonable, in depth and innovative correct solutions provided by the
students should be allocated marks even if not provided in the
memorandum.
._ Take note of the marks allocated to each question.
PERMISSIBLE MATERIALS
None
THIS QUESTION PAPER CONSISTS OF 8 PAGES (Including this front page)
|
|
1.6 Page 6 |
▲back to top |
Case Scenario
Read the following case carefully and use it to answer Section A of this paper.
Namib CC., has the following processes related to purchasing:
When it is determined that an item should be ordered, the purchasing department prepares a three - |
copy PO. The first copy is mailed to the vendor, the second copy is filed by PO number in the purchasing
department, and the third copy is forwarded to inventory control. Inventory control updates the
inventory ledger with the quantities that were ordered and files the PO copy by date.
When ordered items arrive at the receiving dock, the packing slip is inspected and a two - copy |
receiving report is prepared. The first copy is forwarded to the purchasing department, where it is filed
with the PO. The second copy is filed in the receiving department by date. The packing slip is forwarded
to the accounts payable department.
|
Suppliers mail invoices directly to the accounts payable department. The accounts payable department |
reviews the invoice and related packing slip, prepares a cash disbursement voucher, updates the
|
accounts payable ledger, and files the invoice by date. The cash disbursement voucher is forwarded to
the cash disbursements department.
The packing slip is returned to the receiving department. The cash disbursements department prepares
a two - copy check, mails the first copy to the vendor, and forwards the second copy to the general
ledger department. The cash disbursement voucher is forwarded to the accounts payable department
where it is filed with the invoice.
The general ledger department updates the general ledger accounts, using the second copy of the
check, and then forwards the check copy to cash disbursements to be filed by check number.
SECTION A: CASE STUDY QUESTIONS
[60 MARKS]
Question 1
[10 marks]
Prepare a process diagram of the first three paragraphs of Namib CC. processes scenario (the bold
section).
|
|
1.7 Page 7 |
▲back to top |
oN
{a }
{
!i
Prepare 3-copy PO }i
soso
te
Silvke
Repu
Yi
a
rancced
)
i FieCony2
ee
}
i
| Receive coopf yPO!
i
=
}
}
Matinveceto |
Accounts Payare
Dex
bk
ay
Pim
i
i
jms
9 P> m zecer yt i
-
=a
4—— Fecenvelmoxe |
L
jt
seuvecoms
ovennt es
=
—.
Receve Covy 3 of
?o
{
\\| Receve pacting sip -
——————
ff orse mete) |
" - toamacurutae |
as
,
7
-
| Update Invertory
l lecger
posit
:
[ re pFurochrasaingard cocoxpy taond
a
—
-
Receve PackngSip:
to
Question 2
[5 marks]
Explain how using a group coding scheme to design the supplier number may benefit Namib CC. in terms
of effectiveness and efficiency of its internal processes.
Solution
Group codes - Two or more subgroups of digits that are used to code an item.
A group code is often used in conjunction with a block code.
Example:
DIGIT POSITION
MEANING
j-2
Product ling, size, style
Color
_—
Year of manufacture
=
Optional features
There are four sub-codes in the product code, each with a different meaning.
Users can sort, summarize, and retrieve information using one or more sub-codes.
This technique is often applied to general ledger account numbers.
Question 3
[15 marks]
Discuss the concept of internal computer fraud and how internal computer fraud may be perpetrated
within Namib CC. using input manipulation, program manipulation and output manipulation.
Solution
Input manipulation usually involves altering data that is input into the computer.
- For example, altering payroll timecards to be entered into a computerized payroll system is a type
of input manipulation.
Other examples of input manipulation would be creating false or fictitious data inputs, entering
data without source documents, or altering payee addresses of vendors or employees.
|
|
1.8 Page 8 |
▲back to top |
Program manipulation occurs when a program is altered in some fashion to commit a fraud.
Examples of program manipulation include the salami technique, Trojan horse programs, and trap
door alterations.
A fraudster may use the salami technique to alter a program to slice a small amount from several
accounts and then credit those small amounts to the perpetrator’s benefit.
For example, a program that calculates interest earned can be altered to round down to the lower
10-cent amount; that small excess of interest earned can be deposited to the perpetrator’s
account. Although it would take many transactions of this type to be of much benefit, the nature
of interest calculation is such that it occurs frequently on many accounts; therefore, the amount
of the fraud benefit could build quickly.
A Trojan horse program is a small, unauthorized program within a larger, legitimate program,
used to manipulate the computer system to conduct a fraud.
For example, the rogue program might cause a certain customer’s account to be written off each
time a batch of sales or customer payments are processed.
A trap door alteration is a valid programming tool that is misused to commit fraud.
As programmers write software applications, they may allow for unusual or unique ways to enter
the program to test small portions, or modules, of the system.
These entranceways can be thought of as hidden entrances, or trap doors.
Before the program is placed into regular service, the trap doors should be removed, but a
programmer may leave a trap door in place in order to misuse it to commit fraud.
Computer systems generate many different kinds of output, including checks and reports.
If a person alters the system’s checks or reports to commit fraud, this is known as output
manipulation.
This kind of fraud is often successful simply because humans tend to trust the output of a computer
and do not question its validity or accuracy as much as they might if the output were manually
produced
Question 4
[10 marks]
Explain why an enforced code of ethics may have more impact in deterring upper-level management fraud
than the implementation of internal controls.
Solution
A code of ethics is a set of documented guidelines for moral and ethical behaviour within the
organization.
It is management’s responsibility to establish, enforce, and exemplify the principles of ethical
conduct valued in the organization.
Upper-level managers are above the level of internal controls;
Therefore, internal control systems, matching documents, or segregating duties have little impact
on the prevention of fraud by upper-level management.
Having and enforcing a code of ethics sets the proper “tone at the top” and makes it more difficult
for upper-level managers to conduct fraud.
As has become obvious with the flood of accounting fraud scandals at companies such as Enron,
WorldCom, Global Crossing, and others, top management does not always exhibit ethical
behaviour.
If management does not demonstrate ethical behaviour, employees at all levels are much more
likely to follow suit in their disregard for ethical guidelines.
. Management that emphasizes and madels ethical behaviour is more likely to encourage ethical
behaviour in employees.
|
|
1.9 Page 9 |
▲back to top |
Question 5
[20 marks]
Identify any weaknesses in internal controls within the purchase processes of Namib CC. and indicate the
improvements you would suggest.
Authorization
Transaction authorization in real-time processing systems is an automated task.
Management and accountants should be concerned about the correctness of the computer-
programmed decision rules and the quality of the data used in this decision.
In POS systems, the authorization process involves validating credit card charges and establishing
that the customer is the valid user of the card.
After receiving online approval from the credit card company, the clerk should match the
customer’s signature on the sales voucher with the one on the credit card.
Segregation of Duties
Tasks that would need to be segregated in manual systems are often consolidated within
computer programs.
For example, a computer application may perform such seemingly incompatible tasks as inventory
control, AR updating, billing, and general ledger posting.
In such situations, management and auditor concerns are focused on the integrity of the computer
programs that perform these tasks.
They should seek answers to such questions as: Is the logic of the computer program correct? Has
anyone tampered with the application since it was last tested? Have changes been made to the
program that could have caused an undisclosed error?
Answers to the questions lie, in part, in the quality of the general controls over segregation of
duties related to the design, maintenance, and operation of computer programs.
Programmers who write the original computer programs should not also be responsible for
making program changes.
Both of these functions should also be separate from the daily task of operating the system.
Supervision
In an earlier discussion, we examined the importance of supervision over cash-handling
procedures in the mail room.
The individual who opens the mail has access both to cash (the asset) and to the remittance
advice (the record of the transaction).
A dishonest employee has an opportunity to steal the check and manual mail room procedures
are in place.
In a POS system, where both inventory and cash are at risk, supervision is particularly important.
Customers have direct access to inventory in the POS system, and the crime of shoplifting is of
great concern to management.
Surveillance cameras and shop floor security personnel can reduce the risk.
These techniques are also used to observe sales clerks handling cash receipts from customers. In
addition, the cash register’s internal tape is a form of supervision.
The tape contains a record of all sales transactions processed at the register. Only the clerk’s
supervisor should have access to the tape, which is used at the end of the shift to balance the cash
drawer.
Access Control
In computerized systems, digital accounting records are vulnerable to unauthorized and
undetected access.
|
|
1.10 Page 10 |
▲back to top |
This may take the form of an attempt at fraud, an act of malice by a disgruntled employee, or an
honest accident.
Additional exposures exist in real-time systems, which often maintain accounting records entirely
in digital form.
Without physical source documents for backup, the destruction of computer files can leave a firm
with inadequate accounting records.
To preserve the integrity of accounting records, Sarbanes-Oxley legislation requires organization
management to implement controls that restrict unauthorized access.
Also at risk are the computer programs that make programmed decisions, manipulate accounting
records, and permit access to assets.
In the absence of proper access controls over programs, a firm can suffer devastating losses from
fraud and errors. Thus, current laws require management to implement such controls.
Because POS systems involve cash transactions, the organization must restrict access to cash
assets.
One method is to assign each sales clerk to a separate cash register for an entire shift. When the
clerk leaves the register to take a break, the cash drawer should be locked to prevent unauthorized
access.
This can be accomplished with a physical lock and key or by password.
At the end of the clerk’s shift, he or she should remove the cash drawer and immediately deposit
the funds in the cash room.
When clerks need to share registers, responsibility for asset custody is split among them and
accountability is reduced.
Inventory in the POS system must also be protected from unauthorized access and theft. Both
physical restraints and electronic devices are used to achieve this.
For example, steel cables are often used in clothing stores to secure expensive leather coats to the
clothing rack. Locked showcases are used to display jewelry and costly electronic equipment.
Magnetic tags are attached to merchandise, which will sound an alarm when removed from the
store.
Accounting Records
DIGITAL JOURNALS AND LEDGERS.
Digital journals and master files are the basis for financial reporting and many internal decisions.
Accountants should be skeptical about accepting, on face value, the accuracy of computer-
produced hard-copy printouts of digital records.
The reliability of hard-copy documents for auditing rests directly on the quality of the controls that
protect them from unauthorized manipulation.
The accountant should, therefore, be concerned about the quality of controls over the programs
that update, manipulate, and produce reports from these files.
FILE BACKUP.
The physical loss, destruction, or corruption of digital accounting records is a serious concern.
The data processing department should perform separate file-backup procedures .
Typically these are behind-the-scenes activities that may not appear on the system flowchart.
The accountant should verify that such procedures are, in fact, performed for all subsidiary and
general ledger files.
Although backup requires significant time and computer resources, it is essential in preserving the
integrity of accounting records.
Independent Verification
The consolidation of many accounting tasks under one computer program removes some of the
traditional independent verification control from the system.
|
|
2 Pages 11-20 |
▲back to top |
|
|
2.1 Page 11 |
▲back to top |
- Independent verification is restored somewhat by performing batch control balancing after each
run and by producing management reports and summaries for end users to review.
SECTION B: STRUCTURED QUESTIONS
[40 MARKS]
Question 6
[15 marks]
A manger suspects that certain employees are ordering merchandise for themselves over the Internet
without recording the purchase or receipt of the merchandise. When vendor’s invoices arrive, one of the
employees approves the invoices for payment. After the invoices are paid, the employee destroys the
invoices and related vouchers. The manager has been advised it would be best to begin tracing from the
cash disbursements to trace whether this is actually happening. Do you agree with this advice? Support
your answer.
Support
- The record of payment
- Since these fraudsters
invoices and vouchers
would be the only option for possibly uncovering this scheme.
are not recording the receipt of merchandise and they are
destroying
Question 7
[25 marks]
Ozongejama Engineering Corp (OEC) operates in five SADC countries. OEC faced a crucial decision:
choosing network software that would maximize functionality, manageability, and end-user acceptance
of the system. OEC developed and followed a four-step approach:
Step 1.
Develop evaluation criteria. OEC organised a committee that interviewed users and developed the
following evaluation criteria:
- Ease of use
- Scope of vendor support
- Ease of network management and administration
- Cost, speed, and performance
Ability to access other computing platforms
Security and control
Fault tolerance and recovery abilities
Ability to connect workstations to the network
Global naming services
Upgrade and enhancement options
Vendor stability
OEC organized the criteria into the following four categories and prioritized them. Criteria vital to short-
term and long-term business goals were given a 5. “Wish list” criteria were weighted a 3. Inapplicable
criteria were given a 1.
1. Business criteria: overall business, economic, and competitive issues
2. Operational criteria: tactical issues and operating characteristics
3. Organizational criteria: networks’ impact on the information systems structure
4. Technical criteria: hardware, software, and communications issues
Step 2.
Define the operating environment. Several data-gathering techniques were used to collect information
from which an information systems model was developed. The model revealed the need to share
|
|
2.2 Page 12 |
▲back to top |
accounting, sales, marketing, and engineering data at three organizational levels: district, division, and
home office. District offices needed access to centralized financial information to handle payroll. OEC
needed a distributed network that allowed users throughout the organization to access company data.
Step 3.
Identify operating alternatives. Using the criteria from step 1, committee members evaluated each
package and then compared notes during a roundtable discussion.
Step 4.
Test the software. The highest-scoring products were tested, and the product that fit the organization’s
needs the best was selected.
a. Discuss the committee’s role in the selection process.
[5]
An executive level committee to plan and oversee the information systems function.
It consists of high-level management, such as the controller and systems and user-department
management.
The steering committee sets AIS policies; ensures top-management participation, guidance, and
control; and facilitates the coordination and integration of systems activities.
What are the pros and cons of using a committee to make the selection?
[5]
What data-gathering techniques could WEC use to assess user needs and select a supplier?
[5]
- Interviews
- Questionnaires
- Observation
- Systems Documentation
What is the benefit of analysing the operating environment before selecting the software?
[5]
- Helps in Achieving Objectives
- Identification of Threats and opportunities
- Forecasting the Future
Justify whether a purchase decision be made on the point scoring process alone?
[5]
- Evaluating the overall merits of vendor proposals by assigning a weight to each evaluation
criterion based on its importance.
Benchmarking
Performance testing
requirements costing
End of question paper
|
|
2.3 Page 13 |
▲back to top |
4
NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
Faculty of Computing and Informatics
Department of Informatics
QUALIFICATION : POSTGRADUATE CERTIFICATE IN INFORMATICS (INFORMATION SYSTEMS AUDIT)
QUALIFICATION CODE: O8PGCl
LEVEL: 8
COURSE: ACCOUNTING INFORMATION SYSTEMS
COURSE CODE: AIS822S
DATE: JANUARY 2020
PAPER: THEORY
DURATION: 3 Hours
MARKS: 100
SECOND OPPORTUNITY/SUPPLEMENTARY EXAMINATION QUESTION PAPER
EXAMINER(S)
Mr Munyaradzi Maravanyika
MODERATOR:
Ms Valerie Garises
INSTRUCTIONS
Answer ALL the questions.
Write clearly and neatly.
Number the answers clearly.
Do not use additional materials
Cross out any work which should not be marked.
No pencil work allowed except for diagrams where requested.
F7 a
]
THIS QUESTION PAPER CONSISTS OF -PAGES
(Excluding this front page)
|
|
2.4 Page 14 |
▲back to top |
Identify any weaknesses in internal controls within the purchase processes of Namib CC. and indicate the
__improvements you would suggest.
4
——SECTION B: STRUCTURED QUESTIONS
€ Yep. AQ
[40 MARKS]
a.
>a
Question 6
[15 marks]
—m—a—nger suspects that certain. employees are orderin. g merchandis. e for themselves over the Internet
without recording the purchase or receipt of the merchandise. When vendor’s invoices arrive, one of the
employees approves the invoices for payment. After the invoices are paid, the employee destroys the
invoices and related vouchers. The manager has been advised it would be best to begin tracing from the
cash disbursements to trace whether this is actually happening. Do you agree with this advice? Support
your answer.
Question 7
[25 marks]
oy
2 _—Ooozr Ongeja. ma Engi.neerin. g Corp (OEC) operates .in fi* ve SADC countrie. s. OEC faced a crucia. l deciseoison:
7
choosing network software that would maximize functionality, manageability, and end-user acceptance
of the system. OEC developed and followed a four-step approach:
Step 1.
Develop evaluation criteria. OEC organised a committee that interviewed users and developed the
following evaluation criteria:
- Ease of use
- Scope of vendor support
- Ease of network management and administration
- Cost, speed, and performance
- Ability to access other computing platforms
- Security and control
- Fault tolerance and recovery abilities
- Ability to connect workstations to the network
- Global naming services
- Upgrade and enhancement options
- Vendor stability
OEC organized the criteria into the following four categories and prioritized them. Criteria vital to short-
term and long-term business goals were given a 5. “Wish list” criteria were weighted a 3. Inapplicable
criteria were given a 1.
1. Business criteria: overall business, economic, and competitive issues
2. Operational criteria: tactical issues and operating characteristics
3. Organizational criteria: networks’ impact on the information systems structure
4. Technical criteria: hardware, software, and communications issues
Step 2.
Define the operating environment. Several data-gathering techniques were used to collect information
from which an information systems model was developed. The model revealed the need to share
accounting, sales, marketing, and engineering data at three organizational levels: district, division, and
home office. District offices needed access to centralized financial information to handle payroll. OEC
needed a distributed network that allowed users throughout the organization to access company data.
Step 3.
Identify operating alternatives. Using the criteria from step 1, committee members evaluated each
package and then compared notes during a roundtable discussion.
|
|
2.5 Page 15 |
▲back to top |
NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
FACULTY OF COMPUTING AND INFORMATICS
DEPARTMENT OF INFORMATICS
QUALIFICATION : POSTGRADUATE CERTIFICATE IN INFORMATICS (INFORMATION SYSTEMS AUDIT)
QUALIFICATION CODE: O8PGCl
COURSE CODE: AIS822S
| LEVEL: 8
COURSE NAME: ACCOUNTING INFORMATION SYSTEMS
SESSION:
JANUARY 2020
PAPER:
THEORY
DURATION:
3 HOURS
| MARKS:
100
SECOND OPPORTUNITY/SUPPLEMENTARY MEMORANDUM
‘EXAMINER(S)
:
~ MRMUNYARADZI MARAVANYIKA
MODERATOR:
—
MS VALERIE GARISES
INSTRUCTIONS
Please use the memorandum or sample solutions to guide your marking.
Use the marks allocated as a guide to mark
Reasonable, in depth and innovative correct solutions provided by the
students should be allocated marks even if not provided in the
memorandum.
. Take note of the marks allocated to each question.
PERMISSIBLE MATERIALS
None
THIS QUESTION PAPER CONSISTS OF 8 PAGES (Including this front page)
|
|
2.6 Page 16 |
▲back to top |
This technique is often applied to general ledger account numbers.
Question 3
[15 marks]
Discuss the concept of internal computer fraud and how internal computer fraud may be perpetrated
within Namib CC. using input manipulation, program manipulation and output manipulation.
Solution
Input manipulation usually involves altering data that is input into the computer.
- For example, altering payroll timecards to be entered into a computerized payroll system is a type
of input manipulation.
- Other examples of input manipulation would be creating false or fictitious data inputs, entering
data without source documents, or altering payee addresses of vendors or employees.
Program manipulation occurs when a program is altered in some fashion to commit a fraud.
- Examples of program manipulation include the salami technique, Trojan horse programs, and trap
door alterations.
- A fraudster may use the salami technique to alter a program to slice a small amount from several
accounts and then credit those small amounts to the perpetrator’s benefit.
- Forexample, a program that calculates interest earned can be altered to round down to the lower
10-cent amount; that small excess of interest earned can be deposited to the perpetrator’s
account. Although it would take many transactions of this type to be of much benefit, the nature
of interest calculation is such that it occurs frequently on many accounts; therefore, the amount
of the fraud benefit could build quickly.
- A Trojan horse program is a small, unauthorized program within a larger, legitimate program,
used to manipulate the computer system to conduct a fraud.
- For example, the rogue program might cause a certain customer’s account to be written off each
time a batch of sales or customer payments are processed.
- Atrap door alteration is a valid programming tool that is misused to commit fraud.
- As programmers write software applications, they may allow for unusual or unique ways to enter
the program to test small portions, or modules, of the system.
- These entranceways can be thought of as hidden entrances, or trap doors.
- Before the program is placed into regular service, the trap doors should be removed, but a
programmer may leave a trap door in place in order to misuse it to commit fraud.
Computer systems generate many different kinds of output, including checks and reports.
- If a person alters the system’s checks or reports to commit fraud, this is known as output
manipulation.
- This kind of fraud is often successful simply because humans tend to trust the output of a computer
and do not question its validity or accuracy as much as they might if the output were manually
produced
Question 4
[10 marks]
Explain why an enforced code of ethics may have more impact in deterring upper-level management fraud
than the implementation of internal controls.
Solution
- Acode of ethics is a set of documented guidelines for moral and ethical behaviour within the
organization.
- It is management’s responsibility to establish, enforce, and exemplify the principles of ethical
conduct valued in the organization.
- Upper-level managers are above the level of internal controls;
|
|
2.7 Page 17 |
▲back to top |
In a POS system, where both inventory and cash are at risk, supervision is particularly important.
Customers have direct access to inventory in the POS system, and the crime of shoplifting is of
great concern to management.
Surveillance cameras and shop floor security personnel can reduce the risk.
These techniques are also used to observe sales clerks handling cash receipts from customers. In
addition, the cash register’s internal tape is a form of supervision.
The tape contains a record of all sales transactions processed at the register. Only the clerk’s
supervisor should have access to the tape, which is used at the end of the shift to balance the cash
drawer.
Access Control
In computerized systems, digital accounting records are vulnerable to unauthorized and
undetected access.
This may take the form of an attempt at fraud, an act of malice by a disgruntled employee, or an
honest accident.
Additional exposures exist in real-time systems, which often maintain accounting records entirely
in digital form.
Without physical source documents for backup, the destruction of computer files can leave a firm
with inadequate accounting records.
To preserve the integrity of accounting records, Sarbanes-Oxley legislation requires organization
management to implement controls that restrict unauthorized access.
Also at risk are the computer programs that make programmed decisions, manipulate accounting
records, and permit access to assets.
In the absence of proper access controls over programs, a firm can suffer devastating losses from
fraud and errors. Thus, current laws require management to implement such controls.
Because POS systems involve cash transactions, the organization must restrict access to cash
assets.
One method is to assign each sales clerk to a separate cash register for an entire shift. When the
clerk leaves the register to take a break, the cash drawer should be locked to prevent unauthorized
access.
This can be accomplished with a physical lock and key or by password.
At the end of the clerk’s shift, he or she should remove the cash drawer and immediately deposit
the funds in the cash room.
When clerks need to share registers, responsibility for asset custody is split among them and
accountability is reduced.
Inventory in the POS system must also be protected from unauthorized access and theft. Both
physical restraints and electronic devices are used to achieve this.
For example, steel cables are often used in clothing stores to secure expensive leather coats to the
clothing rack. Locked showcases are used to display jewelry and costly electronic equipment.
Magnetic tags are attached to merchandise, which will sound an alarm when removed from the
store.
Accounting Records
DIGITAL JOURNALS AND LEDGERS.
Digital journals and master files are the basis for financial reporting and many internal decisions.
Accountants should be skeptical about accepting, on face value, the accuracy of computer-
produced hard-copy printouts of digital records.
The reliability of hard-copy documents for auditing rests directly on the quality of the controls that
protect them from unauthorized manipulation.
The accountant should, therefore, be concerned about the quality of controls over the programs
that update, manipulate, and produce reports from these files.
|
|
2.8 Page 18 |
▲back to top |
- Vendor stability
OEC organized the criteria into the following four categories and prioritized them. Criteria vital to short-
term and long-term business goals were given a 5. “Wish list” criteria were weighted a 3. Inapplicable
criteria were given a1.
1. Business criteria: overall business, economic, and competitive issues
2. Operational criteria: tactical issues and operating characteristics
3. Organizational criteria: networks’ impact on the information systems structure
4. Technical criteria: hardware, software, and communications issues
Step 2.
Define the operating environment. Several data-gathering techniques were used to collect information
from which an information systems model was developed. The model revealed the need to share
accounting, sales, marketing, and engineering data at three organizational levels: district, division, and
home office. District offices needed access to centralized financial information to handle payroll. OEC
needed a distributed network that allowed users throughout the organization to access company data.
Step 3.
Identify operating alternatives. Using the criteria from step 1, committee members evaluated each
package and then compared notes during a roundtable discussion.
Step 4.
Test the software. The highest-scoring products were tested, and the product that fit the organization’s
needs the best was selected.
a. Discuss the committee’s role in the selection process.
[5]
An executive level committee to plan and oversee the information systems function.
It consists of high-level management, such as the controller and systems and user-department
management.
The steering committee sets AIS policies; ensures top-management participation, guidance, and
control; and facilitates the coordination and integration of systems activities.
What are the pros and cons of using a committee to make the selection?
[5]
What data-gathering techniques could WEC use to assess user needs and select a supplier?
[5]
- Interviews
- Questionnaires
- Observation
- Systems Documentation
What is the benefit of analysing the operating environment before selecting the software?
[5]
- Helps in Achieving Objectives
- Identification of Threats and opportunities
- Forecasting the Future
Justify whether a purchase decision be made on the point scoring process alone?
[5]
- Evaluating the overall merits of vendor proposals by assigning a weight to each evaluation
criterion based on its importance.
- Benchmarking
- Performance testing