Mickie Louderman is the new assistant controller of Pickens Publishers, a growing company with sales of $35 million. She was formerly the controller of a smaller company in a similar industry, where she was in charge of accounting and data processing and had considerable influence over the entire computer center operation. Prior to Mickie’s arrival at Pickens, the company revamped its entire computer opera¬ tions center, placing increased emphasis on decentralized data access, personal com¬ puters with mainframe access, and online systems.

John Richards, the controller of Pickens, has been with the company for 28 years and is near retirement. He has given Mickie managerial authority over both the imple¬ mentation of the new system and the integration of the company’s accounting-related functions. Her promotion to controller will depend on the success of the new AIS.

Mickie began to develop the new system by using the same design characteristics and reporting format she had used at her former company. She sent details of the new AIS to the departments that interfaced with accounting, including inventory control, purchasing, human resources, production control, and marketing. If they did not respond with suggestions by a prescribed date, she would continue the development process. Mickie and John determined a new sehedule for many of the reports, chang¬ ing the frequency from weekly to monthly. After a meeting with the director of com¬ puter operations, Mickie selected a programmer to help her with the details of the new reporting formats.

Most of the control features of the old system were maintained to decrease the initial installation time, while a few new ones were added for unusual situations. However, the proeedures for maintaining the controls were substantially changed. Mickie appointed herself the decisive authority for all control changes and program testing that related to the AIS, including the screening of control features related to payroll, inventory control, accounts receivable, cash deposits, and accounts payable.

As each module was completed, Mickie told the corresponding department to implement the change immediately, to take advantage of the labor savings. However, incomplete instructions accompanied these changes, and specific implementation responsibility was not assigned to departmental personnel. Mickie believes that opera¬ tions people should learn as they go, reporting errors as they occur.

Accounts payable and inventory control were the initial areas of the AIS to be implemented, and several problems arose in both. Mickie was disturbed that the semi¬ monthly runs of payroll, which were weekly under the old system, had abundant errors and, consequently, required numerous manual paychecks. Frequently, the control totals of a payroll run would take hours to reconcile with the computer printout. To expedite matters, Mickie authorized the payroll clerk to prepare journal entries for payroll processing.

The new inventory control system failed to improve the carrying level of many stoek items, causing several critical raw material stockouts that resulted in expensive rush orders. The new system’s primary control procedure was the availability of order¬ ing and user information. The information was available to both inventory control and purchasing personnel so that both departments could issue purchase orders on a timely basis. Because the inventory levels were updated daily, Mickie discontinued the previ¬ ous weekly report.

Because of these problems, system documentation is behind schedule and proper backup procedures have not been implemented in many areas. Mickie has requested budget approval to hire two systems analysts, an accountant and an administrative assistant, to help her implement the new system. John is disturbed by her request because her predecessor had only one part-time assistant.

Required

a. List the steps Mickie should have taken during the design of the AIS to ensure that end-user needs were satisfied.

b. Identify and describe three areas where Mickie has violated the basic principles of internal eontrol during the implementation of the new AIS.

c. Refer to Mickie’s approach to implementing the new AIS.
1. Identify and describe its weaknesses.
2. What recommendations do you have that would improve the situation and allow development to continue on the remaining areas of the AIS?