College of Administration and Finance SciencesAssignment (2)
Deadline: Saturday 03/06/2023 @ 23:59
Course Name: Introduction to
Accounting Information Systems
Student’s Name:
Course Code: ACCT 402
Student’s ID Number:
Semester: Third Term 22/23
CRN:
Academic Year: 1444 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/15
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
• Submissions without this cover page will NOT be accepted.
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College of Administration and Finance Sciences
Assignment Question(s):
(Marks 15)
Question 1:
(03 Marks)
What are the activities of sales order entry? Give four of the threats that may face and what could be
the possible controls for those threats?
Answer:
Activities of Sales order entry:
1. Take order I ail
2. Check and approve credit
3. Check inventory
Threat
1. Incomplete or inaccurate customer orders
2. Credit sales to customers with poor credit
3. Legitimacy of order
4. Lost sales due to stockouts, excessive carrying costs, and lost revenue due to markdowns
Control
1. Various programmed edit controls
2. Proper credit approval, prior to delivery of goods or services; accurate, current customer data.
3. Authorized customer purchase order; digital signatures.
4. Inventory control systems; periodic physical inventory counts; improved sales forecasts; better
supply chain management
Question 2:
(03 Marks)
What are the advantages of the REA data model over the traditional AIS model?
Answer:
The REA data model is more accurate, has a higher performance level, and is more reliable
than the traditional building system model. The REA has increased performance, thus making
organizations more profitable. Secondly, using the REA model makes organizations more responsive
and adaptable to environmental changes (Seow & Pan, 2017). The approach makes the organization
more competitive than firms using the traditional model. The third advantage is that REA helps
organizations become more effective by focusing on core economic activities. The last advantage is
that the REA model helps identify and eliminate non-value-adding activities, thus contributing to
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College of Administration and Finance Sciences
higher profitability than firms using the traditional model.
Question 3:
(04 Marks)
Under the payroll system of an organization we find several components such as HRM Department,
Employees, Bank, Government Agencies, Insurance and other companies, Various other departments.
Take an example of an organization and explain the relationship of these components with reference
to Payroll System of that Organization
Answer:
General Motors Company is an example of a company with various payroll system
components. The first department is the human resources department. The relationship between the
payroll system and the HR department is that the HR department provides information on the number
of employees, working hours, allowances, and salary scale to facilitate payroll preparation for financial
accountability (Feng & Slaoui, 2016). The second component is the employees, who are essential in
providing various services to ensure that the payroll system and other departments operate effectively.
The relationship between the payroll system and employees is that employees provide personal
information that helps calculate their salaries and compensation. In contrast, the payroll system
calculates the right pay for individual workers.
The third component of a payroll system is the bank. The relationship between payroll and
banks is that the payroll system helps determine the compensation, salary, and bonuses for individual
employees, while banks ensure that the employees get their pay on time. The last component is the
government agency. The government agency’s role is to ensure that the organization complies with the
rules and regulations on employee compensation. For example, the government may set the minimum
wage per hour, and the agency would ensure that the organization complies with the requirement.
Question 4:
(05 Marks)
Shahid Corporation is a midsize, privately owned, industrial instrument manufacturer supplying
precision equipment to manufacturers in the Midwest. The corporation is 10 years old and uses
an integrated ERP system. The administrative offices are located in a downtown building and
the production, shipping, and receiving departments are housed in a renovated warehouse a
few blocks away.
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College of Administration and Finance Sciences
Customers place orders on the company’s website, by fax, or by telephone. All sales are on
credit, FOB destination. During the past year sales have increased dramatically, but 15% of
credit sales have had to written off as uncollectible, including several large online orders to
first-time customers who denied ordering or receiving the merchandise.
Customer orders are picked and sent to the warehouse, where they are placed near the loading
dock in alphabetical sequence by customer name. The loading dock is used both for outgoing
shipments to customers and to receive incoming deliveries. There are ten to twenty incoming
deliveries every day, from a variety of sources.
The increased volume of sales has resulted in a number of errors in which customers were sent
the wrong items. There have also been some delays in shipping because items that supposedly
were in stock could not be found in the warehouse. Although a perpetual inventory is
maintained, there has not been a physical count of inventory for two years. When an item is
missing, the warehouse staff writes the information down in log book. Once a week, the
warehouse staff uses the log book to update the inventory records.
The system is configured to prepare the sales invoice only after shipping employees enter the
actual quantities sent to a customer, thereby ensuring that customers are billed only for items
actually sent and not for anything on back order.
Questions:
a. Identify at least three weaknesses in Shahid Corporation’s revenue cycle activities.
b. Describe the problem resulting from each weakness.
c. Recommend control procedures that should be added to the system to correct the weakness.
Answer:
A) The first flaw in shahid Corporation’s revenue cycle activities is credit sales of all goods and freeon-board services regardless of customer category. The second weakness is poor inventory
management, and the third is incorrect item delivery to customers.
b) The credit sales and free-on-board delivery cause an increase in bad debts, amounting to about 15%
of the sales. Poor inventory management causes delays in shipment since the organization has to wait
for the arrival of suppliers to fulfill customers’ orders. When the wrong items are delivered to
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College of Administration and Finance Sciences
customers, it causes dissatisfaction and could lower sales. The management must work on its
weaknesses to generate higher profits.
c) The control procedures that should be added to the system to correct the weaknesses include the
following: The first is vetting new customers to reduce bad debt since the worst debt arises from sales
to unknown customers. Secondly, the organization should include cash on delivery for new customers
and customers with bad credit records to reduce the losses arising from bad debts. Thirdly, the
organization should include an electronic inventory management system to help determine the amount
of inventory in the stores to avoid order fulfillment delays. Lastly, the organization should have
mechanisms for verifying customers’ orders before dispatch to ensure that the customers get the right
items.
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