ACCT 402 SEU Accounting Purchasing at Inflated Prices Questions

Assignment Question(s):
(Marks 15)
Question 1:
(03 Marks)
Under the expenditure cycle ordering materials, supplies and services are the first
activity. Explain the following ordering threats with suitable example with each of
these.
a) Purchasing at inflated prices
b) Unreliable Suppliers
c) Kickbacks
Answer:
Question 2:
(03 Marks)
What are the advantages of the REA data model over the traditional AIS model?
Answer:
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:
Question 4:
(05 Marks)
Eid 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. 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 Eid 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: