The case involves issues at Springer’s Lumber & Supply regarding poorly documented purchasing systems, missing purchase requisitions, and potential creative accounting by management. Concerns were raised about violations of control procedures, management authority, and the ethical responsibilities of the individuals involved. The document outlines the legal framework including the FCPA and Sarbanes-Oxley Act, emphasizing the need for effective internal controls to prevent financial mismanagement.

2. CONTROLAND
ACCOUNTING
INFORMATION SYSTEMS

3. STATEMENT OF THE CASE
Jason Scott
Northwest Industries
Maria Pilier

4. STATEMENT OF THE CASE
Springer’s
Lumber &
Supply
Trace a sample of purchase
transactions from purchase
requisition to cash disbursement
to verify that proper control
procedures were followed.

5. STATEMENT OF THE CASE Springer’s
Lumber &
Supply
• The purchasing system is poorly documented.
• He keeps finding transactions that have not
been processed as Ed Yates, the account
payable manager, said they should be.
• Purchase requisitions are missing for several
items personally authorized by Bill Springer,
the purchasing vice president
• Some vendor invoices have been paid without
supporting documents, such as purchase
orders and receiving reports
• Prices for some items seem unusually high
and there are few discrepancies in item
prices between vendor invoice and the
corresponding purchase order.

6. HAH? ANO DAW? Springer’s
Lumber &
Supply
Ed Yates
THE REAL WORLD IS NOT AS
TIDY AS THE WORLD
PORTRAYED IN COLLEGE
TEXTBOOKS.

7. STATEMENT OF THE CASE Northwest Industries
• Springer’s is the largest supplier in the area
and has a near monopoly
• Management authority is held by the company
president, Joe Springer and his 2 sons, Bill
(VP Purchasing) and Ted (Controller). Several
relatives and friends are on the payroll.
Together, the Springer’s own 10% of the
company.
• Lines of authority and responsibility within
the company are loosely defined and
confusing.
• Maria believes that Ted Springer may have
engaged in creative accounting to make
springer’s one of the northwest’s best
performing retail outlets

8. STATEMENT OF THE CASE Northwest Industries
1. Because Ed Yates
had a logical
explanation for every
unusual transaction,
should Jason describe
these transactions in
his reports?

9. STATEMENT OF THE CASE Northwest Industries
2. Is a violation of
control procedures
acceptable if
management has
authorized it?

10. STATEMENT OF THE CASE Northwest Industries
3. Maria’s concern about
Springer’s loosely defined
lines of authority and possible
use of “creative accounting”
are matters of management
policy. With respect to Jason’s
control procedures
assignment, does he have a
professional or an ethical
responsibility to get involved?

11. OVERVIEW OF
CONTROL CONCEPTS

14. Information Technology Department
Accounting Department
CAPABILITIES RISKS

15. In 1977, Foreign Corrupt Practices Act
(FCPA) was passed to prevent companies
from bribing officials to obtain business.
Congress incorporated language from an
American Institutes Of CPA (AICPA)
pronouncement into FCPA that required
corporations to maintain good systems of
internal control. Unfortunately, these
requirements were not sufficient to prevent
further problems.

16. Congress passed the Sarbanes- Oxley Act
(SOX) of 2002. SOX applies to publicity
held companies and their auditors and was
designed to prevent financial statement
fraud, make financial reports more
transparent, protect investors, strengthen
internal controls, and punish executives
who perpetrate fraud.

17. CONTROL
FRAMEWORKS

23. One week after Jason and Maria filed their audit report,
they were summoned to the office of northwest’s director of
internal auditing to explain their findings. Six months later,
a company newsletter indicated that the Springer family
sold 10% interest in the business and resigned from all
management positions. There was no other word for the
audit findings.
SUMMARY AND CASE CONCLUSION

24. reference
• Romney & Steinbart. (2012). Accounting Information Systems: Global
Edition. Pearson Higher Education. ed.12