.

Answer ALL Questions from Part I and Any Three Questions from Part
II
3 Hours only
Part I
Question 1
The purpose of the GREEN ACRES REAL ESTATE SYSTEM is to assist agents as
they sell houses. Sellers contact the agency, and an agent is assigned to help
the seller complete a LISTING REQUEST. Information about the house and lot
taken from that request is stored in a file. Personal information about the
sellers is copied by the agent into a sellers file.
When a buyer contacts the agency, he or she fills out a BUYER REQUEST. Every
two weeks, the agency sends prospective buyers AREA REAL ESTATE LISTINGS
and an ADDRESS CROSS REFERENCE LISTING containing actual street addresses.
Periodically, the agent will find a particular house that satisfies most or all of a
specific buyers requirements, as indicated in the BUYERS REQUIREMENTS
STATEMENT

distributed weekly to all agents. The agent will occasionally

photocopy a picture of the house along with vital data and send the MULTIPLE

LISTING STATEMENT (MLS)

to the potential buyer.

When the buyer selects a house, he or she fills out an

OFFER

that is forwarded

through the real estate agency to the seller, who responds with either an OFFER
ACCEPTANCE

or a

COUNTER OFFER.

AGREEMENT

is signed by all parties. After a

notarized, the agency sends an

After an offer is accepted, a

PURCHASE

PURCHASE AGREEMENT

APPRAISAL REQUEST

is

to an appraiser, who

appraises the value of the house and lot. The agency also notifies its finance
company with a FINANCING APPLICATION .
Required
(a) Draw Context Diagram

(08 marks)

(b) Draw Level zero Diagram

(12 marks)
(Total 20 marks)

Question 2
The Computer Warehouse sells computer hardware, software, and supplies (such as
paper). Individual customers just walk into the store, select merchandise, and must
pay for their purchases in full before leaving the store. Corporate customers, however,
call in orders in advance, so that the items are waiting to be picked up. Corporate
customers may charge their purchases to their account. The Computer Warehouse
mails corporate customers monthly statements that summarize all purchases made the
prior month. Corporate customers pay the entire balance, as listed on the monthly
statement, with one check or EFT transaction.

Draw an REA Diagram for Computer Warehouse revenue cycle, complete with
cardinalities.
(Total 20 marks)

Part II
Question 3
What internal control procedure (s) would provide protection against the following threats?

a. Workers on the shipping dock steal goods, claiming that the inventory shortages
reflect errors in the inventory records.
b. An employee posts the sales amount to the wrong customer account because he
incorrectly keys the customer account number into the system.
c. An employee makes a credit sale to a customer who is already four months behind in
making payments on his account.
d. An employee authorizes a credit memo for a sales return when the goods were never
actually returned.
e. An employee writes off a customers accounts receivable balance as uncollectible to
conceal the theft of subsequent cash payments from that customer.
f. Customers are billed for the quantity ordered, but the quantity shipped is actually less
because some items have been bank ordered.
g. The mailroom clerk steals checks and then endorses them for deposit into the clerks
personal bank account.
h. The cashier steals funds by cashing several checks from customers.
i. A waiter steals cash by destroying the customer sales ticket for customers who paid
cash.
j. Goods are shipped to a customer, but that customer is not billed.
(Total 20 marks)

Question 4
Elite Publishing Company has established Business Book Club, Inc. (BBC), a
subsidiary that operates as follows. BBCs editors select from among recently
published business books those they believe will be most interesting to business
people. BBC will purchase these books in large quantities at approximately 40% of
list price and then sell them to their club members at approximately 75% of list price.
Both direct mail and advertisement in selected publications are used to solicit new
customers. The advertisement offers an introductory membership bonus whereby new
members who purchase one book will receive four free titles. Each month, club
members receive a list of new selections and a book order form. For every four books
they purchase, members earn one free book.
You have to been called upon to design a computerized billing and book inventory
system for BBC. The advertising manager wants to know which advertising media are
most effective, the credit manager wants to know which accounts are more than 90
days past due, and the editors want to know which books are best sellers for the club.
Required
(a) Describe how IT can be used to maximize efficiency of sales order entry,
shipping, and billing and cash collections.
(10 marks)
(b) Describe the control procedures that should be included in this system.

(10 marks)
(Total 20 marks)

Question 5
The receiving department at Clip Electronics Company processes inventory deliveries
upon arrival by means of online data terminals located on the receiving dock. Each
inventory receipt entered in to the system is processed to update both the inventory
master file and the open purchase order file. The system then automatically generates
a voucher to authorize a cash disbursement for each receipt.
Required
(a)
What items of data should receiving department of employees enter?
(10 marks)
(b)
Describe several applications control that should be programmed in to the
system to check the accuracy and validity of the data the receiving
department employees enter
(10 marks)
(Total 20 marks)
Question 6
Although most medium and large companies have implemented sophisticated payroll
and HRM systems like the one described. Many smaller companies still maintain
separate payroll and HRM systems that employ many manual procedures. Typical of
such small companies is the KWD Manufacturing Company, which employs about 50
production workers and has the following payroll procedures.
The factory supervisor interviews and hires all job applicants. The new
employee prepares a W-4 form (Employees withholding Exemption
Certificate) and gives it to the supervisor. The supervisor writes the hourly
rate of pay for the new employee in the corner of the W-4 form and then
gives the form to the payroll clerk as notice that a new worker has been
hired. The Supervisor verbally advises the payroll department of any
subsequent pay raises.

A supply of blank time cards is kept in a box near the entrance to the
factory. All workers take a time card on Monday morning and fill in their
names. During the week they record the time they arrive and leave work
by punching their time card in the time clock located near the main
entrance to the factory. At the end of the week the works drop the time
cards i n a box near the exit. A payroll clerk retrieves the completed time
cards from the box on Monday morning. Employees are automatically
removed from the payroll master file when they fail to turn in a time card.
The payroll checks are manually signed by the chief accountant and then
given to the factory supervisor, who distributes them to the employees.
The factory supervisor arranges for delivery of the paychecks to any
employee who is absent on payday.
The payroll bank account is reconciled by the chief accountant, who also
prepares the various quarterly and manual tax reports.
Required
(a)
Identify weaknesses in current procedures, and explain the threats that they
(b)

may allow to occur.

(10 marks)
Suggest ways to improve the KWD Manufacturing Companys internal
controls over hiring and payroll processing.

(10 marks)
(Total 20 marks)

Question 7
An important control procedure involves the periodic reconciliation of general ledger
accounts with their subsidiary ledgers. Explain how this control procedure works in
the context of accounts payable.
Your answer should specify how to verify the accuracy, completeness, and validity of
all entries involving purchases, purchase returns, purchase discounts and cash
disbursements.

(Total 20 marks)