Question 4

Managers at some companies face an ongoing systems development crisis: IS departments develop
systems that businesses cannot or will not use. At the heart of the problem is a “great divide” that
separates the world of business and the world of IS. Few departments seem able or ready to cross
this gap.

One reason for the crisis is that many companies are looking for ways to improve existing, out-of-
date systems or to build new ones. Another is the widespread use of PC-based systems that have
spawned high user expectations that IS departments are not meeting. Users seek more powerful
applications that are available on many older systems.

The costs of the great divide can be devastating. An East Coast chemical company spent over $1
million on a budgeting and control system that was never used. The systems department’s expertise
was technical excellence, not budgets. As a result, the new system completely missed the mark
when it came to meeting business needs. A Midwestern bank used an expensive computer-aided
software engineering (CASE) tool to develop a system that users ignored because there had been no
design planning. A senior analyst for the bank said, “They built the system right; but unfortunately
they didn’t build the right system.”

(source: Romney, M. B., & Steinbart, P. J. (2017). Accounting information systems. 14th edition,
Pearson.)
Required:
(a) What is the great divide in the systems development process? What causes the gap?
(9 marks)

Answer Mark

The great divide is the gap between the information needs of business managers and
the information and system produced by the IS developers.

The great divide occurs because of the better-educated end users demanding more
powerful information systems and better results from information systems that aren’t
performing.

In other words the system and information from the IS department is unrealistic and useless.

This is because the IS people does not understand operations and the management of
the business hence causing them to produces/ developed system that did not achieve
the expectations of the users (businesses).

(b) What would you suggest to solve this great divide information crisis?
(8 marks)

Answer Mark
Effective system development – week 12

A first step in effective system design is a system analysis to understand how a business
operates and how its business function relates. This help system professionals and business
managers to communicate effectively when developing an integrated system. According to the
effective system development approach it is to result in a high quality system that meets
customer’s expectation, by achieving this the IS can do system surveys, determine information
need and system requirement s from the customers (businesses) – system analysis.

Week 12
Business could hire managers with a system background so they can connect the systems
department with the finance and accounting department, helping business managers to
communicate clearly what they need.

These managers should be willing and able to get involve in the IS development process, a more
integrated approach to system development involving all the necessary partis: designers,
programmers, business managers and the end-users.

Apart from the IS department should keep the user’s expectation low by being more realistic,
developing useful and powerful systems. – control expectations

More involvement and interaction between the systems staff and the end-users. End users
should take an active role in the development process. Designers should work closely with end-
users to access needs and to develop specific working solutions.
– keep open communication between users and designers.

Training
The companies’ management should provide training program for the employees who
 are going to use the new system.

(c) Discuss the role of a systems designer, business manager, and end-user can take to narrow the
great divide.
(6 marks)

Answer Mark
The system designer will evaluate design alternatives 备用 to the system, prepare design
specification, prepare conceptual specification and physical system design. For example: these
design how the system output should be, etc.

Business managers
Business manager’s role is to get user involve in the process, provide support by providing
resources for the IS development to development projects, align projects to meet organizations
strategic needs.

End-users:
Most important role in the part of the team, so that they can convey 传达 business process
knowledge to the development team.

(d) Who plays the most vital role in the effective development of the system?
(5 marks)

Answer Mark

All players play important role is this system development process.

The “information crises” was due to overreliance upon the systems analyst to meet the needs
of managers and end-users without their cooperation and input/ support.

It also a result of analysts not taking the time to understand the business processes at their
compony.
Without the end-user, knowledge of the business and needs of the users are not met.

IS developers are also important because how well the systems is developed depends on their
skills and experience.
Top management are also important because they provide support by resources or in term of
financial and also time.

Sample questions #2 S1 2020

DO NOT RELY JUST ON THESE QUESTIONS. THIS IS JUST EXAMPLES OF QUESTIONS THAT CAN
COME OUT
Question 1 – error on the software which provided incorrect
data/ amount (solution = testing & structured walkthrough)
Water ABC is a private company that supplies water to the state of ABC. During MCO (Movement
Control Order), Water ABC is unable to carry out manual reading of water billing. As a result, Water
ABC use a computer system to estimate the amount to be charge to customers based on their
average monthly usage.

However, many customers complained that they received the wrong amount. For example, one
customer complained that her usual water bill is $14.80 per month. However, she was charged
$1,480. Another customer complained that his average water bill is $35.00 per month. His water bill
during MCO is $3,500.00 for that month.

Required:
(a) Identify two (2) problems that could result in these errors.
(4 mark)

Answer Mark
Problem 1
This could be due to the software bugs in the software

Problem 2
Another problem is that the software is correct but the formula feed into the software
is incorrect
i.e. did not divide the amount by 100 as the amount of the bill is 100 times more than
the correct once.

(b) For the two (2) reasons above, recommend the appropriate internal control procedures to
mitigate the issues. Explain your recommendations in DETAIL.
(8 mark)

Answer Mark
Recommendation for problem 1
The first recommendation will be testing the software before use. Testing the software could be
done by comparing the software output with the historical data output, by using the historical
input data and the output data from the software should match with the historical data result.
Testing the software should be using the extreme data, for example the negative amount or
amount that are very large/ small.

Recommendation for problem 2

Water ABC can use the structured walkthrough.

It is an organized procedure for a group or peers to review and discuss the technical aspects of
a software development, it will run through a logic of their program and calculation with users.

In doing so, the errors will be found and corrected in the lifecycle before the software is coded,
which save time.
Question 2 – inventory management (manually stock take and RFID
& barcode)
XYZ is a retail clothing that has three shops in Selangor. The following describes the physical stock
count processes.

XYZ will close their shops to customers for one day on 31 December, which is one of the busiest
shopping days in Malaysia. Staffs will then cordoned off the area of the warehouse for clothes that
have just been returned by customers. The accounting staff will also include in the inventory, any
outstanding orders from suppliers that have not yet arrived at the stores.

The staff will create a map of the store and stock room. This map shows where the products is
located at every rack, display, wall and shelf. The staffs will have to manually count and write the
different types and amounts of the items into stock sheets. The staffs will also write and note any
clothing that are damaged, for example, clothes’ stain caused from mould and mildew. The staff will
label the inventory of the type and count on the shelves and in the warehouse.

Image source: https://www.ezrshelving.com/shop-floor-retail-shelving.html

Required:
(a) Identify three (3) problems with the manual stocktake processes described in the case.
(9 mark)

Answer Mark
Problem 1

31 december was the busiest shopping day in Malaysia while XYZ is closing their shop, this means
that they are losing revenue for closing for one day.

Problem 2
The manual stock take takes up many staff as it is a manually laborious process.

Problem 3
 The manual process have the risk of causing human errors. For example, missed
counting stock or overcounting stocks.

(b) Recommend two (2) solutions to the problems associated with the manual physical count. Justify
and explain in DETAIL your solutions.
(12 mark)

Answer Mark
Solution 1
RFID could be use to improve the stock counting process. RFID need each clothes to have a
RFID tags, then the staff can scan using a RFID reader to record the clothes’ quantity and type.
The staffs can also input automatically clothes that are damaged by scanning the RFID of those
affected items.

Solution 2
Barcode, work similarly like RFID, but each clothes will have a barcode instead of a RFID tags.
The staff can scan barcode by barcode reader to record the information of the clothes.

Although the barcode can only scan one item at a time while RFID can scanned multiple at a
time which shows that barcode is slower yet it is still faster than the manual stocktake process
where the XYZ is using.

Question 3 – Qualitative Characteristic of AIS system, 2 AIS general

system (adv and disadv)
KYZ is a manufacturing company that produces widgets. This company started in 1995 and has
grown tremendously. It has now 4 factories located in various parts of industrial zones in Malaysia.
The current AIS system has trouble coping with the growth. The current system could only handle a
single user in a single location. Responding to queries from customers are slow and time to process
the orders are longer as the AIS system struggles to process increasing orders. There is also high
probability that the Malaysian Government will introduce GST.

Required:
(e) Justify why a change in the current AIS is required?
(2 mark)

Answer Mark
A change in current AIS is needed as it responding to the queries from customers are
slow and time to process the orders are longer due to the fact that is struggles to
process increasing orders.

(f) Propose the most important qualitative characteristics of the new AIS system that KYZ should
prioritise. Explain your answer in DETAIL.
(12 mark)

Answer Mark
Qualitive characteristic that is important in this case will be the scalability of the new
accounting system.
Scalability is the ability of software cope with the increase in the business growth.

1.
With scalability the new AIS system will be able to add on modules that cope with new taxation
requirements (i.e. GST). By adding add-on modules that can increase the functionality of the
new AIS system.

2. With scalability the new AIS system will be able to have muti-user and multi -location. The
multi-user/ location can be used to solve the lost update problem. The lost update problem is
causes when there is 2 transactions being update into the same record in the same data and
same time. The solution is the concurrency control by locking the record until one of the
transaction is recorded.

3. Scalability also able the new AIS system to cope with the increase in growth of business.
Some accounting software have limitations in the number of records that this software can
process, such as software can only work on one computer and do not support additional
hardware processing.
Thus, choosing certain AIS software that can easily add in more hardware without the need of
changing the whole system is important in this case.
(g) Recommend two (2) AIS general system that could help in this case. Explain in detail your
answers any advantages and disadvantages your recommendation.
(12 mark)

Answer Mark
1. Clouding accounting software
- Cloud accounting software, it allow the AIS system to resides/ store data in the internat.
Thus cloud AIS accounting already supports multi-location.

-Some cloud computing do support multi-users by locking the data records of users when they
is updating the system.

- Cloud computing also can support increase in volume. Some AIS in cloud have tiered scales
charger according to the volume of the transaction. 分级收费

- Cloud AIS computing have programmers who can change the cloud software
according to the change in law.

The major disadvantage is that cloud accounting software is rely on the network/ internet.
Therefore is the goes down/ slow then the processing can’t be done.

Advantage =
1. support multi-location, as it allow AIS system to resides/ store data online in multiple
countries.

2. support multi-users, as some cloud accounting software will lock the record when the user
are updating transaction into the record.

3. support increase in volume, as AIS in clous have tiered scales charge according to the volume
of the transactions.

4. Cloud AIS computing have dedicated programmers who can change the software when there
is a change in the law.

Dis =

- rely on internet, is the internet goes down, the data/ processing cannot be done.

2. ERP
Another solution is ERP, stand for enterprise resources planning.

- ERP integrates and automates many different functions (accounting, purchasing, customer
relationship management and the supply chain operations) in an organization.

- The purpose of the ERP is to aid decision makes in planning, budgeting, predicting and
accurately access the organization’s process and finances.

- The key objective of ERP is to centralized data, so that all the organization functions will input,
update, and retrieve data from the centralized database.

- This means that there will only be a centralize system which save time and make it easier
when converting the data as there is only one standard format and quality of data.
- with standardize format and quality, the ERP could easily retrieve data and share against the
 organization functions to provide real-time report.

- in ERP, it is a large AIS system which integrates all the different process/ area in the
organization.

- ERP support multi- location, multi-location, volume and have support from changes in
taxation law from the ERP vendors.

- ERP can improve the productivity by automating the core business processes to help the
organization do more with fewer resources.

Disadvantage for ERP is that the for benefit of ERP to be realized will take on average 2-3 years

ERP
- all the core business processes the needed to run a business (e.g., finance,
HR, manufacturing, supply chain, services), ERP help to efficiently manage all
these processes in an integrated system.
= system that record of the organization

An ERP software system provides the automation, integration and intelligence

that is essential to effectively run all day-to-day business operation.
6 benefit of ERP system:
1 high productivity, it streamline and automate your core business processes
to help everyone in your organization do more with fewer resources.
2. deeper insights, it eliminate silos, gain a single source of truth, and get fast
answers to mission-critical business question
3. lower risk, it maximizes business visibility and control, ensure compliance
with regulatory requirements, and predict and prevent risk.
4. simpler IT, by using ERP application that share a database, it will simplify IT
an gives everyone an easier way to work.

Exam Sample 4 Answer Guide

Question 1
KBY is a small-sized furniture manufacturing company in Malaysia. You are the senior accountant for
KBY and have been called into a meeting to discuss two issues.

On the first issue, KBY is deciding whether to give each of their department managers a company
credit card. The credit cards are meant for their managers to purchase non-inventory purchases for
their departments. These purchases include office supplies and travel expenses. KBY is also thinking
of setting the credit card limit to RM 1,500 per transaction and RM 20,000 per month. Purchases
above that limit would require the formal requisition process.

In the formal requisition process, the managers would complete a purchase requisition form, which
is then submitted to their supervisor for verification and approval. Then, the form would be routed
to the purchasing department. The purchasing department would get at least three quotations from
the various vendors in the vendor approved list. Once all the quotations are in, the purchasing
department would then select the vendor based on price and track record in delivery and
quality.This whole process might take 1-2 months before payments are made to the suppliers.

The internal auditor remarked that he is uncomfortable with company credit cards being given to
managers because of the potential for misuse and fraud. He suggested that the same formal
requisition process be applied to the credit card purchases. The managers would still be required to
fill in a requisition form and submit it to the purchasing department. Once the purchasing
department has approved the purchase, the manager can then use the company credit card for that
purchase transaction.

On the second issue, there was a discussion in the meeting regarding the purchasing manager who
has started his own business, ABC Company. ABC Company has just recently supplied raw materials
to KBY. The purchasing manager defended his company by stating that ABC Company products has
been independently audited and rated highly by AQF (Asia Quality Focus -
https://www.asiaqualityfocus.com/about-us/coverage-area/malaysia-inspection-audit-quality-
control). Thus, his company should continue to supply to KBY without question.

Required:
(c) Should the formal requisition process also be applied to the credit card? Justify your answer.
(10 marks)

Answer Mark
The answer is no.

The purpose of the company credit cards are to give the managers’ the ability to make
quickly and easily purchase for their area of responsibility without the need for the
tedious process.

The formal requisition approval for all purchases would negate the benefit of the
company credit card.
 In addition, the limits for each credit card transactions and total also acts as a control.
Even if, there is fraud the amount is immaterial.

Analytical skills

(d) Recommend and explain the three (3) internal controls that should be applied to the company
credit cards besides (i.e. in addition to) the credit limit on the cards.
(9 marks)

Answer Mark
1) Reviews and audits of purchases made by managers entrusted with the credit cards. The
reviews and audits must also require proper documentation related to each purchase made
with the credit card.
2) Budgets and detailed variance analyses are an important detective control to identify
potential problems with misuse of credit cards before they get too large.
3) Managers receiving cards must be properly trained in their proper use. If managers know
that any purchase they make can be the subject of subsequent review and audit, they are
more likely to make legitimate purchases. Managers are trained to keep and lodge their
original receipts or other formal documentation.
4) Managers receiving cards must be communicated the controls implemented by the
organization. During credit card training, it should be emphasized that employees will be
required to produce original receipts or other formal documentation for all items purchased.

Week 10 Slide 19 lecture (communication), Week 11 Slide 10 & 38 (training), &

Analytical skills

(e) Recommend and explain whether KBY should continue to buy from ABC Company.
(11 marks)

Answer Mark
The answer is no.

The purchasing manager should be let go and purchase from ABC company should be
discontinued.

1) The primary issue here is conflict of interest. By allowing the purchasing manager to own an
independent company that supplies KBY, KBY is in effect misaligning the interests of the
purchasing manager with its own interests. KBY wants to purchase at the lowest cost and at
the highest quality. On the other hand for ABC, the higher the prices the ABC company
charges, the more money the purchasing manager makes.

2) The independent rating and quality organisation is not sufficient. The independent audit
quality cannot audit every transaction. Since the purchasing manager has intimate
knowledge of KBY’s operations and cost structure, he has the ability to structure
transactions that could conceal purchases that were favorable to the purchasing manager’s
business and unfavorable to KBY.

Analytical skills
Question 2

SafeAudit is a medium-sized audit firm in Selangor, Malaysia.One of the Information Systems

Auditors has suggested the use of REA diagrams in the audit process. This will help the audit firm in
analysing their clients and improve their audit quality. You are the senior auditor for the firm and
from your AIS lectures you recalled that

“REA (Resources, Events, Agents) is a business process modeling ontology, closer to the business
reality than any other known alternative. Unlike all other approaches, the REA model reveals why
business processes occur, and provides for full traceability of all business transactions. Due to its
abstraction level covering the business domain, the REA ontology is very useful in model-driven
design of software applications.” (http://reatechnology.com/what-is-rea.html)

Required:
Recommend and explain three (3) areas in which REA be used to help in the audit process.

(18 marks)

Answer Mark
Recommendation 1: To understand clients’ processes
Explanation
As REA is a model that represents the resources (assets & liabilities), events (financial
and non-financial transactions) and agents. It also represents the tables in the database
and the relationships that exist between the tables.

REA can be used to looked at events that affect the client’s resources and which agents
are responsible for that events. The cardinalities in REA diagram provides information
about the client’s business practices, for example whether installment payments by
customers are allowed.

Recommendation 2: For audit planning

Because REA models the business processes, auditors can you REA to plan and audit key
accounts. For example, if instalment payments are permitted the auditors could verify
whether the clients are following IFRS15 Revenue Recognition correctly.

Recommendation 3: For initially evaluating the internal controls

Since REA models the client’s resources, events and the agents, the auditor can initially
determine if the internal controls are adequate. For example, does the agents have
sufficient segregation of duties? The auditor can then, test and verify if this is the case.

Mostly analytical analysis and basic from Lecture 8

Question 3

Happy Mart is a grocery store located in one of the apartments in Sunway, Malaysia. Happy Mart
sells various groceries to the local residents (see Figure 1).

Figure 1: Happy Mart Store

The diagram below depicts the process of sales to Happy Mart customers (see Figure 2).

Figure 2:Documentation of sales

Required:
a) What type of diagram is this? Justify your answer
(3 marks)

Answer Mark
Logical Data Flow Diagram (DFD)

It is logical DFD as oppose to physical DFD because the bubble/circle has verbs (instead
of nouns of person).
OR
Logical DFD describes the events that transforms the data.
 Week 7 lecture & Week 8 tutorial

b) What should be in the labels a, b, c, d and e of Figure 2.

(5 marks)

Answer Mark
Label a:
Barcode data
Label b:
Barcode data
Label c:
Item description and prices
Label d:
Items and prices
Label e:
Payment/Sales amount

Analytical skills

c) List five (5) attributes that might be included in the “Item file”.
(5 marks)

Answer Mark
Any five below:
 Item barcode
 Item description
 Item price
 Item amount
 Item supplier code

Analytical skills

d) Write a narrative for the process that is depicted in Figure 2.

(6 marks)

Answer Mark
The customer will give item to the cashier. The cashier will scan the item’s barcode.

The system will use the barcode data to search the Item file to determine the item
description and price.

The item price will then be used to calculate the total sales.

Once all items have been scanned, the total sales amount will be calculated.

The cashier will then receive cash from the customer and generate the sales transaction
and issue out the receipt to the customer.
Week 7 lecture & Week 8 tutorial
e) Recommend and explain two (2) additional controls(plans, activities, procedures) to enhance the
internal controls of the business process for HappyMartdepicted in Figure 2.
(6 marks)

Answer Mark
There should be
a) Deposits of cash daily into the bank to reduce chances of misappropriation and
misuse
b) Reconciliation of cash deposits with sales receipts to be done daily
Accept alternate reasonable answers (e.g surprise inventory count and reconciliation to
books)

Week 10 & 11 lecture, & Week 11 tutorial & Week 11 Int Ctrl Additional Explanation File