Question: Identify Computer Control Weaknesses. Ajax Inc., an audit client, recently installed a new accounting information system to process its shipping, billing, and accounts receivable records more efficiently. During interim work, an assistant completed the review of the accounting information system and the internal controls. The assistant determined the following information concerning the new accounting information system and the processing and control of shipping notices and customer invoices. Each major computerized function (i.e., shipping, billing, accounts receivable) is permanently assigned to a specific computer operator who is responsible for making program changes, running the program, and reconciling the computer log. Responsibility for custody and control over the various databases and system documentation is randomly rotated among the computer operators on a monthly basis to prevent any one person from access to the database and documentation. Each computer programmer and computer operator has access to the computer room via a magnetic card and a digital code that is different for each card. The systems analyst and the supervisor of computer operators do not have access to the computer room. The computer system documentation consists of the following items: program lists, error lists, logs, and database dictionaries. To increase efficiency, control totals (both batch totals and hash totals) and processing controls are not used in the system. Ajax ships its products directly from two warehouses that forward shipping notices to general accounting. There, the billing clerk enters the price of the item and accounts for the numerical sequence of the shipping notices. The billing clerk also prepares daily summaries of the units shipped and the sales amounts. Shipping notices and summaries that are forwarded to the computer department for processing the computer output consist of the following:
• A three-copy invoice that is forwarded to the billing clerk.
• A daily sales register showing the aggregate totals of units shipped and sales amounts that the computer operator compares to the summaries. The billing clerk mails two copies of each invoice to the customer and retains the third copy in an open invoice file that serves as a detail accounts receivable record.
Required: a. Prepare a list of weaknesses in internal control (manual and computerized) and describe one or more ways to address each.
b. Suggest how Ajax's automated processing over shipping and billing could be improved through the use of remote terminals to enter shipping notices. Describe appropriate IT controls for such an online data entry system.