Question #1 (20 points) As you know, there are several ways to migrate from one system to another. First, describe each of the methods that can be used. When change accounting systems organizations have two options which are applicable to implement the change as they anticipate it to be. The company can choose; i) Complete change, here they are required to throw away the old system and implement the new one. Under this method, the operations are brought to a standstill as they implement it. ii) Phase by phase change, here the organization is required to do it as per department. They are required to select a pilot project. This is done to test whether the system being selected is suitable and can deliver as per their plans. This helps in developing the systems before they are put in place. Secondly, describe the advantages of each method. Next, describe the disadvantages to each method. Advantages of complete change 1. It helps in consistency of operations. 2. It saves on time and cost associated with Change period. Disadvantages of complete change 1. Operations are stopped during the implementation of the 2. In case the system fails to work the operations are affected 3. Low productivity due lack of training and low competence of the new system Advantages of phase by phase 1. It allows time for testing the suitability of the system before its implemented to all departments 2. It allows time for staff training as they implement it in each department. 3. It reduces the stoppage time in case of breakdown as opposed to when implemented across the whole company systems. Disadvantages 1. In case it fails it, the department is left behind as they try to reintroduce the old systems 2. It consumes a lot of time before its put in place in the entire company systems. Finally, identify and discuss the pros & cons of purchasing a commercial-off-the-shelf accounting system vs building one from scratch. The advantages of a commercial-off-the-shelf accounting system include: Cost: since the off the shelf product is produced for market, the economies of scale dictate that it will be less expensive to acquire than a custom system. Customer support: Many commercial-off-the-shelf systems come from reputable companies that provide customer support to clients. Previous clients might have experienced certain common problems which will be logged with the company. This will ensure fast resolution of nay arising difficulties. Reliability: Before gaining federal approval, commercial-off-the-shelf products undergo rigorous testing to ensure they fulfill all the requirements set out for the programs. This is particularly important as there will be no time wasted on resolving development glitches that affect all new software. Although there are a lot of advantages to commercial-off-the-shelf there are also some disadvantages. These include: Failure to meet specific needs: Unlike custom built systems, commercial-off-the-shelf tend to focus mainly on ar ...

1. Question #1 (20 points) As you know, there are several ways to
migrate from one system to another. First, describe each of the
methods that can be used.
When change accounting systems organizations have two
options which are applicable to implement the change as they
anticipate it to be. The company can choose;
i) Complete change, here they are required to throw away the
old system and implement the new one. Under this method, the
operations are brought to a standstill as they implement it.
ii) Phase by phase change, here the organization is required to
do it as per department. They are required to select a pilot
project. This is done to test whether the system being selected is
suitable and can deliver as per their plans. This helps in
developing the systems before they are put in place.
Secondly, describe the advantages of each method. Next,
describe the disadvantages to each method.
Advantages of complete change
1. It helps in consistency of operations.
2. It saves on time and cost associated with Change period.
Disadvantages of complete change
1. Operations are stopped during the implementation of the
2. In case the system fails to work the operations are affected
3. Low productivity due lack of training and low competence of
the new system
Advantages of phase by phase
1. It allows time for testing the suitability of the system before
its implemented to all departments
2. It allows time for staff training as they implement it in each
department.
3. It reduces the stoppage time in case of breakdown as opposed
to when implemented across the whole company systems.
Disadvantages
1. In case it fails it, the department is left behind as they try to

2. reintroduce the old systems
2. It consumes a lot of time before its put in place in the entire
company systems.
Finally, identify and discuss the pros & cons of purchasing a
commercial-off-the-shelf accounting system vs building one
from scratch.
The advantages of a commercial-off-the-shelf accounting
system include:
Cost: since the off the shelf product is produced for
market, the economies of scale dictate that it will be less
expensive to acquire than a custom system.
Customer support: Many commercial-off-the-shelf systems
come from reputable companies that provide customer support
to clients. Previous clients might have experienced certain
common problems which will be logged with the company. This
will ensure fast resolution of nay arising difficulties.
Reliability: Before gaining federal approval, commercial-
off-the-shelf products undergo rigorous testing to ensure they
fulfill all the requirements set out for the programs. This is
particularly important as there will be no time wasted on
resolving development glitches that affect all new software.
Although there are a lot of advantages to commercial-off-
the-shelf there are also some disadvantages. These include:
Failure to meet specific needs: Unlike custom built
systems, commercial-off-the-shelf tend to focus mainly on areas
of commonality. Since they are made with a wide range of
clientèle, commercial-off-the-shelf will most likely lack
company specific aspects that might be required.
Security concerns: With most commercial-off-the-shelf
systems existing in the market, there is a high risk of the system
being compromised. Not all who acquire such systems have the
intention to use them as intended. Criminals and competitors
can become too familiar with an off the shelf system hence
compromising the system.
Question #2 (20 points) For each item, identify & describe at
least three internal control procedures that would reduce the

3. following risks in a manual system:
1. The purchasing department not being notified when goods
need to be purchased.
Creating a purchase schedule; where the use of the product
can easily be determined, the purchase department in
conjunction with other departments can come up with re-order
levels and thus have a regular date for restocking.
Establishing clear communication lines: Having proper
communication lines between all departments that consumer
products brought in and the purchase department will ensure
timely notification of the purchase department.
Having a center to aid in the tracking of goods; The
consumption rate for different products is likely to vary greatly.
A control center will enable the purchasing department get
regular updates on the amount of stock that is available and
determine when to order more.
2. Purchase orders being prepared based on unauthorized
requisitions.
Restricting access to purchase order documentation: by
ensuring there is a designate person who is to do the purchase
orders and requisitions, there will be greater accountability and
ease of tracking on all purchase orders.
Better coordination: opening the communication lines
between those who are authorized to do requisitions and those
involved in preparing purchase orders will ensure there are
different levels of scrutiny before an order is processed.
3. Payments may be made for items not received.
Implementing cash on receipt policy: To ensure all goods
are paid for only when received, payments should be made once
goods change hand. This will ensure no disparity between
purchases and stock.
Renegotiating with supplier: Getting suppliers to accept
their cash on delivery will ease the need to follow up on
whether goods were delivered or not.
Having proper documentation; Simple documents like
delivery notes that can be counter checked against purchase

4. orders, and invoices will greatly reduce chances of payments
being made before goods are delivered.
Question #3 (20 points) In order to understand an existing
system, you must collect data about the system. There are
several methods (at least three) that can be used to help you to
collect data about the system so that you will have an
understanding of it. Identify & describe each collection method
and identify at least three strengths / weaknesses for each
method.
i) Random sampling
This where one moves across the market and tries to gather
information from different companies who are using the system
to carry the duties as those you intend the system for. This
method is effective as details come from those who have
actually used the system in their operations. However this posse
a great risk to the success of the company since no competitor
can give the right details of the system in case they found it
best or they deceive you that the system is not suitable.
ii) Surveys
An organization can do survey in the market by
looking from the shops the best system for their operations.
This is actually done by experts who are familiar of what they
are actually interested in carrying out. This comes with the
advantage of making tremendous improvement in the operating
and having the intended results if all goes well. However, this is
not the best method as sellers are out to make money and they
can’t tell the truth in relation to the systems as their business is
to make sales.
iii) Secondary sources
An organization can make their changes by starting to
research on the intended changes from the documented changes
which are actually effective for decision making. The secondary
sources can be from journals, websites and other published
sources. These sources are not that reliable as some data might
mislead the decisions the firm is taking. According to experts
views it’s crucial for the firm to make decisions on the basis of

5. their knowledge and experts experience.
Question #4 (20 points) We know how information technology
can greatly enhance the processing of transactions and
distribution of output from an AIS. For the Revenue &
Expenditure cycles, identify at least three specific ways (tools)
that information technology can be used to improve each of
these processes. Next, you will need to identify & describe
three internal control methods that is needed for each item
i) check registers
ii) sales orders
iii) customer billing statements
iv) sales analysis reports
v) purchase requisitions
vi) vendor invoices
Controls
The internal controls of an AIS are the security measures it
contains to protect sensitive data. These can be as simple as
passwords or as complex as biometric identification. An AIS
must have internal controls to protect against unauthorized
computer access and to limit access to authorized users which
includes some users inside the company. It must also prevent
unauthorized file access by individuals who are allowed to
access only select parts of the system.
AIS contain confidential information belonging not just to
the company but also to its employees and customers. This data
may include Social Security numbers, salary information, credit
card numbers, and so on. All of the data in AIS should be
encrypted, and access to the system should be logged and
surveilled. System activity should be traceable as well.
Question #5 (20 points) You have been hired by SEC to present
information on the effectiveness of SOX (Sarbanes-Oxley Act
of 2002). Using what we learned about usefulness of
information, identify and describe SOX , using the
characteristics of useful information. Be sure that you provide a
definite of each of the characteristics of ‘useful information’
when presenting your information.

6. Sarbanes-Oxley Act of 2002 is an act that was passed in
2002 by the American Congress that mandated strict reforms to
improve financial disclosure from corporations and prevent
accounting fraud. The Financial Accounting Standards Advisory
Board (FASB) established and maintains generally accepted
accounting principles (GAAP) which set the qualities and
standards of accounting information. These qualities aid
auditors verify a company's records. These characteristics
include:
Relevance
When accounting information is relevant it is predictive
and there is feedback value. Investors must be able to review
accounting information and asses its financial worthiness, this
is the relevance bit. If management cannot use this information
to make decisions on business operation, then the information
fails the feedback test.
Timeliness
If accounting information is not available in a timely
manner, its usefulness is diminished or completely eliminated.
This requires recording of appropriate financial transactions in
the right period and generating reports as soon as all data is
available so as to solve any issues before they escalate.
Reliability
To meet GAAP standard for reliability, the information
must be verifiable(paper trail for all entries in the general
ledger). Information recorded need only to meet GAAP
standards and not altered to reflect better on the company's
financial performance.
Consistency
For accounting information to be useful, it must be
recorded consistently I.e, the same treatment applied to a given
type of accounting data. Recording the same monthly expense in
different expense accounts skews the expense categories making
it harder to determine the actual expense in any one category.
Comparability
Inability to compare accounting information from one

7. period to another makes it impossible to derive useful
information in order to make operational decisions. Without
consistency then comparison is useless.
Question #6 (20 points) There are several ways to collect and
manage your customers’ debt (Billing & A/R). First, describe
each of the methods that can be used (note: the techniques to
collect & manager the debt are NOT the same). Secondly,
describe the advantages of each method. Next, describe the
disadvantages to each method.
Question #7 (20 points)
You have been hired by the AICPA to develop guidelines that
should be when creating general-ledger accounts in accounting
systems. First, describe at least four guidelines that should be in
place for designing coding systems to support the creation &
maintenance of these accounts. Secondly, describe the problems
that can occur when firms do not follow these guidelines.