Auditing

AUDITING I HANDOUT PROBLEM 13 Score_ Name Section Essay Question (10 points). The following represent errors that could occur in a computerized environment. (b) (c) The selling price for all products handled by company salespersons was consistently reduced by 25 to 40 percent by a salesperson who was paid commission on gross sales made. The marketing department did not authorize the salesperson or any other salesperson) to discount any price from the authorized price lists unless the marketing manager or the district sales manager provided specific approval. Duplicate paychecks were prepared for all employees in the company's warehouse for the week ended July 31. This occurred because the data processing department processed employee time cards twice. An employee in the sales order department who was upset about an inadequate pay raise copied the client's product master file and sold it to a competitor. The master file contained information on the cost and sales price of each product as well as special discounts given to customers. An individual in the customer relations department gained access to the product master file and, in an attempt to change prices for a customer, inadvertently changed prices for the products identified for all customers. A nonexistent part number was included in the description of goods on a shipping document. Fortunately, the individual packing the item for shipment was able to identify the product by its description and included it in the order. The item was not billed, however, because it was not correctly identified in the system. A customer number was transposed during the order taking process. Consequently, the shipment was billed to another customer. By the time the error was identified, the original customer was out of business. (e) (g) | The accounts receivable clerk, who also operated the company's personal computer, took cash remittances and recorded the credit to the customer's account as discounts. (h) An employee consistently misstated his time card by returning at night and punching out then, rather than when his shift was over at 3:30 P.M. Instead of being paid for 40 hours per week, he was paid, on average, for over 60 hours per week for almost one year. When accused of the error, he denied any wrongdoing and quit. A customer order was filled and shipped to a former customer, who had already declared bankruptcy. The company's standard billing terms are 2/10, net 30. REQUIRED: For each error, identify an application control procedure that would have been effective in either preventing or detecting the error