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St . James Clothiers
Evaluation of Manual and IT-Based Revenue Accounting System Risks
Backup Right: Anthony Butka Ralph Avallone Hong-Ming Yen
We all meet Sally St . James of St . James Clothiers who has a retail clothing store in Tennesse. Sally has made a decision to abandon her manual product sales entry program and come to be a more superior IT-based software. As the audit involvement team we have been asked to examine narratives of former years and then draft a story for the brand new system. We will address the weaknesses of having a manual primarily based sales entrance system. All of us will discuss how turning to an IT-based will take care of some of those disadvantages. We will likely then talk about a number of the new risks that Sally St . James will face with the IT-based sales system. Finally we all will make some recommendations on making the transformation process an excellent one.
5. some. 1 After review of St James a lot of risk elements have been recognized due to their manual operations system. The pointed out risk areas pose a risk to the income declaration and balance sheet. The accounts that are that are impacted are definitely the cash harmony and inventory balance. On the other hand cost of goods sold, fees, sales earnings, compensation, amongst otherwise are generally impacted too. One risk intangible which is not discussed is a risk of dropping customers because of a poor standing and customer support. a. The simple fact that the cashier manually information the sales person name, merchandise number, variety sold, and sales cost on a pre-numbered ticket reveal a potential misstatement in all these types of categories since the cashier may make an error or deliberately record the wrong sales info. The clerk also has the ability to alter the genuine sales volume driving potential misstatement inside the income assertion and "balance sheet". b. Intended for special things, the cashier refers to magazine clippings of advertisements, available sale symptoms, or can ask the salesperson intended for the price. The fabric misstatement likely to occur due to customers shifting signs or perhaps salespeople having control of price of items which they sell imposes a risk to St . James as there is no reliable source to determine the actual cost. c. A risk towards the cash readily available at the level of deal is vulnerable by the reality the draw can be exposed by pressing the " TotalвЂќ switch on the sign-up. This means that now you may open the register and physically remove the contents with the draw. m. A revenue transaction generates two receipts, one is provided to the customer plus the other is locked in the register. Nobody except a store accountant may unlock the tape from your register. In the event the accountant offers
access to the only store record of a sales transaction, this presents the potential for the accountant and supervisor to collude and gloss over cash from your register to be able to match the altered statements for that day. e. When the store can be busy, a sales clerk will assist the cashier with check outs. However , by simply putting a attendant at the Stage of Sales runs the chance of being able to identify who's recording which purchase. Similar to the risk we see at stated intervals a and b. f. The cashier processes sales returns by completing a revenue ticket applying negative amounts. However yes and no that make believe tickets could possibly be created in order to record and take cash out of the enroll. g. Ruben Thornberge your local store manager counts the cash every night and works on a deposit slide and then compares to accountants record. Similar to the risk in step deb, the store director and documentalist could come together in order to screen something other than what in fact occurred. 5. 4. a couple of After review of the manual system, we all the auditors then discussed the effects of the new IT system features and just how they might reduce all the dangers that we recently addressed. a. When the product prices are stored in some type of computer, the system can automatically compute the duty, total volume, and price. Here simply no manual errors are possible,...
References: Messier, William. Glover, Steven. Prawitt, Douglas N. Auditing & Assurance Services-A Systematic Procedure. McGraw-Hill Irwin. Seventh Edition. 2009.