Case 5.

4
St. James Clothiers
Evaluation of manual and IT-based sales accounting system risks
Work Sheet for question 1 & 2 Student’s Name: Aislinn Mc Kenna
Risks of manual System How Risks impact financial New IT system feature that
Statements mitigate manual system risk
 The risk that staff could The impact here would be that the The IT system will eliminate this as it
give the wrong sales sales figure could be out but also automatically puts through selling price
figures as the more they the wages figures would be out too quantity, product number and
sell the big the bonus because the factious sales our personnel code with leaves very little
they get. included in this and then this will room for errors in sales but also if the
have a knock on effect in the product number is not on the system
income statement. the sales cannot be processed.
 The risk that the This could easily happen because As I said before sales tickets will no
cashier might sales personnel our only human longer have to be prepared all this
miscalculate discounts, and humans make mistakes. The information will be stored on the
deductions or sales impact on this would be that sales computer and the manager is he only
price because cashiers figures could be too high or too low one that has access to change the
refers to the sales depending on the mistake. Also the price’s and this software is controlled
person, in store sales tax charge will be out because he with a password.
signage and tax is charged on the amount paid
advertisements to work by the customer.
them out
 Risk that inventory If accurate records our not kept The advantage of the IT system here is
could be lost or stolen mistakes can easily be made and that unlike the manual one we now
by both customers and this will affect your figure for stock have daily stock records, monthly
or staff because there is and cost of sales in the financial postings to the ledger and it also makes
not enough records statement meaning that your it easier for the account who does a
kept. accounts won’t give a true and fair comparison daily of the stock on the
view of the company. The accounts shelves to what has been sold to check
affected here will be both income that the figures are right. Compared to
statement and balance sheet. the manual system if there is a
discrepancies it can be sorted out
straight away.
 The risk that because The impact of this is that the wrong The fact that all this is done
the cashier manually sales information could be electronically it would nearly hard to
records information recorded to the income statement create fake and if this does happen the
such as product code, fact that the computer clock the clerks
sales price, quantity name when the sale goes through we
and clerks name to a know exactly who did it as each staff
pre numbered card that member has a different password.
the potential of a
misstatement or a he
chance of them
intentionally making a
mistake is very high
 The risk that the cash This could have an effect on the When the IT is entered it will be a lot
drawer is too easily cash balance. harder to get access to the cash drawer
accessible to staff given as the only way to open it is if you
them the temptation to make a sale or if the manager opens it
steal with their password unlike the manual
system were anybody could open it.
 The risk that fraud This could affect the cash balance Although when the IT system is put in
could be committed all sales may not be entered into there is still like segregation of duties
because on the days the till meaning that the staff could but they do have a control put in place
 that the sales clerks take money from sales for that all cashiers and sales clerks have
help the cashiers there themselves. Sales could be affected individual password to that they would
is not enough as errors could occur when their be less likely to make a fraudulent sales
segregation of duties. entering them leading to the sales when the manager can very easily find
Meaning that the figure being out and the income out that it was them. Segregation of
person that helps with statement. duties still need to be dealt with here.
the order also takes the
cash for it

Question 3
How does the IT-based sales system create new risk for material misstatement?

Question 4
What recommendations do you have related to plans for actual conversion to this new system?