Reference no: EM133207331

You are the audit manager assigned to the financial statement audit of Best Buy Inc. (BBI). This year, BBI implemented an integrated computer system to manage the general ledger as well as inventory, purchases and sales.  The system was developed by external consultants and is maintained by BBI's IT department. 

You are in the process of reviewing the work performed by the audit senior assigned to audit the conversion procedures completed by BBI.  The following is an extract from the audit working paper file prepared by the audit senior.

Conversion procedures completed by BBI:

The balances from the previous accounting system, as well as those in other master records such as the customer and supplier databases, were transferred to a new system at the beginning of the year. The old system has been kept functional to allow historical records to be viewed, since they were not transferred. This is the supplier's standard procedure, because it would take too much time to enter the previous years' information into the new system, which provides more details. It also allows audit procedures to be performed on the old system in case they are required.

BBI performed the following procedures as part of the conversion:

• Ensured total general ledger debits equalled total general ledger credits
• Ensured total accounts payable, accounts receivable, and inventory sub-ledger balances equaled general ledger balances
• Ensured the total number of records in each of the customer and supplier master databases didn't change

BBI noted that problems with balances occurred during the conversion because a text file was used to transfer data between systems. Some customers and suppliers have complained about incomplete addresses, which has caused delivery delays. Slight imbalances between the sub-ledger and the general ledger were noticed during conversion, and manual adjustments were made to correct the balances in the new system.

Conversion audit procedures performed by the audit senior

Audited the matching of balances and found no discrepancies. BBI's conversion procedures were adequate since errors were corrected immediately.

a) Evaluate BBI's controls over the conversion and the related audit work preformed by the senior auditor.  Support your answer with four points.

b) Provide Anne with three risks that could occur at her business for the company's present systems with respect to information systems acquisition and maintenance. For each risk, provide a control or procedure that Anne or her staff could perform to mitigate the risk.