When a company converts from a manual to a computer accounting system, many records and documents become unnecessary and therefore are not prepared. With the audit trail eliminated or distorted, the auditor must focus on controls over computer applications. Consider the following brief description of a manual cash disbursements system;

Purchase invoices are received in the accounting department from the various departments that have purchased goods and services. The accounts payable clerk matches the purchase invoices with supporting documents such as purchase orders, receiving reports, and inventory records. The clerk then prepares a voucher to record a liability for the amount of the purchase. Another clerk schedules the payments due to assure that all discounts for early payment are earned. Five days before the due date, the clerk prepares the documentation and the check, which are submitted to the controller for review and approval.

Required:

1. List and explain areas that could be automated.

2. What controls should be present in the proposed automated system?