Reference no: EM131356540

The following is a list of 12 control plans:

Control Plans
A. Enter data close to where customer order is prepared
B. Customer existence check
C. Independent shipping authorization
D. Completed picking ticket file
E. One-for-one checking of the goods, picking ticket, and packing slip
F. Preformatted screens
G. Interactive feedback check
H. Reasonableness check
I. Backup procedures (for data)
J. Program change controls
K. Librarian controls
L. Personnel termination controls

REQUIRED: Listed next are eight system failures that have control implications. List the numbers 1 through 8 on your solution sheet. Next to each number, insert one letter from the preceding list, identifying the control plan that would best prevent the system failure from occurring. Also, give a brief (one- to two-sentence) explanation of your choice.

A letter should be used only once, with four letters left over.

System Failures
1. A clerk logged on to the online sales system by entering the date of June 39, 20XX, instead of the correct date of June 29, 20XX. As a result, all sales orders entered that day were dated incorrectly.

2. The correct goods were delivered by the warehouse to the shipping department. However, a dishonest shipping clerk misappropriated some of the goods and short-shipped the customer. When the customer complained, the dishonest clerk claimed that the goods must have never been received from the warehouse. Because there was no way to prove otherwise, the company had to provide the additional goods to the customer.

3. A former employee of the order entry department gained access to the department after hours and logged on at one of the computers. He entered an order for a legitimate customer but instructed the system to ship the goods to his home address. Consequently, several thousand dollars worth of inventory was shipped to him. When the misappropriation was discovered, he had long since left the company and had changed addresses.

4. Century Inc.'s field salespeople record customer orders on prenumbered order forms and then forward the forms to central headquarters in Milwaukee for processing. Fred Friendly, one of Century's top salespeople, had a very good week; he mailed 40 customer orders to headquarters on Friday afternoon. Unfortunately, they were misplaced in the mail and did not reach Milwaukee until two weeks later. Needless to say, those 40 customers were more than a little displeased at the delay in their orders being filled.

5. Ajax Corporation recently converted to a new online sales system. Clerks key in order data at one of several computers. In the first week of operations, every sales order produced by the system was missing the data for the "ship to" address.

6. At XYZ Co., the finished goods warehouse delivers goods to the shipping department, accompanied by the picking ticket. After checking the goods against the picking ticket, the shipping employee signs the picking ticket and gives it to the warehouse employee. Then the shipping department prepares a three-part shipping notice, one copy of which serves as the packing slip. A recent audit discovered that a dishonest warehouse employee had been forging picking ticket documents, allowing her to have goods shipped to an accomplice.

7. The job of a systems programmer included doing maintenance programming for the marketing and sales system. He altered the programs so that the credit-checking routine was bypassed for one of the customers, a company owned by his uncle. The uncle obtained several thousand dollars of merchandise before his firm went bankrupt.

8. To encourage new business, Carefree Industries adopted a policy of shipping up to $1,000 of orders to new customers during the period in which the customer's credit was being investigated. A recently terminated order entry manager at Carefree, aware of the policy, placed several bogus telephone orders, disguised each time as a first-time customer. She absconded with over $10,000 of merchandise that was shipped to her.