Question 1 [15 Marks]
Cambridge Limited is a large engineering firm that provides spare parts, lubricants and similar products to support heavy industry, and has provided you the following extract of their Entity Relationship Diagram.
You can assume that all sales orders received before 9am are shipped that day. Customers are invoiced on the next day. Cambridge does not accept backorders
In addition, Cambridge notes that most of their customers are large multi-divisional companies. When providing credit to these customers each division is given a credit limit, and the company has an overall credit limit (approximately 90% of the combined credit limit of the subsidiaries).
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Question 1.1 [5 Marks]
a) What is the purpose of the Warehouse Product entity? Explain with reference to the diagram both from a process perspective and from a data perspective. (2 marks)
From a database perspective it breaks down the many to many relationships between Warehouse and Product (1)
From a process perspective it allows for the tracking of each product within each Warehouse (1)
b) Given the relationship between sales order and invoices, what does this suggest about how Cambridge fulfill customer orders. Explain with reference to the diagram. (3 marks)
Sales order may generate multiple picking lists (1), with each shipment (based on the picking list) to be related to an invoice (1). Therefore, customer receives multiple invoices (1)
Question 1.2 [5 Marks]
Following the recent insolvency of one of its customers Cambridge has discovered that it had exceeded its credit limit and is asking for your help in determining how the check for available credit should occur for a division.
Required: Explain what entity or entities and attributes should be involved in a check for available credit of Cambridge’s multi divisional customers.
Customer Hierarchy to identify each customer, and division. (1)
Customer to identify the credit limit for the group entity AND each division. (1)
The value of total open sales orders for each division, and the group (1)
The total value of open invoices for each division and group (1)
This provides the available credit for the group and division (credit limit less open sales order less invoices) and can be checked against the sales order (1)
NOTE: Max. 3 marks if only at divisional level. Question 1.3 [5 Marks]
Imagine it is the morning of July 1st, and the company wishes to prepare financial statements for the year ended June 30.
What entity or entities and attributes would be involved in the preparation of the BALANCE SHEET?
What account(s) on the statement would be affected? How would each of the identified entities and fields contribute to calculating (added, multiplied, subtracted, some records filtered out etc.) the values of these accounts on the statement.
Inventory (0.5): the sum of cost price * quantity for each item on hand as of June 30) (1 mark cost * qty on hand, 1 mark sum of all inventory items).
Accounts Receivable (0.5) (sum of total value 1 mark, for all open invoices 1 mark) NOTE: for any additional account – e.g., cash (-0.5 mark)
Question 2 [17 Marks] Question 2.1 [4 Marks]
The use of using scanning technology (i.e., barcodes or RFID) in the process of receiving shipments of inventory could be considered helpful to management in terms of making various assertions
Evaluate this statement with respect to information quality goals and explicitly state which assertions and type of assertions may be supported.
Validity, Completeness (E) & Accuracy (1)
Valuation & Allocation, Completeness, Existence (2) (1 mark – identification; 1 mark – explanation) Period End assertion – (1) (inventory on BS, hence no period assertion)
Question 2.2 [3 Marks]
“Since flowcharts depict a process, their use for management who has adopted a functional view of the firm is quite limited.” Is this statement correct? Explain why or why not using examples to support your argument.
No (1). Can be used to document who is responsible for what within a department (swimlanes!), which is the focus of the functional view (1) and still serve other purposes, such as training, regulatory requirements etc. (1) (any other uses would be acceptable)
Question 2.3 [4 Marks]
“To help achieve strategic objectives, the best quality accounting information, and increase efficiency, organisations should use standardised (i.e., “off the shelf” – and generally best practice) processes to achieve the organisation’s goals and values”.
Is the above statement, correct? Discuss the arguments for and against.
For: from an efficiency standpoint, “off-the-shelf” processes should have been optimised for efficiency (1). When the process is not a point of differentiation for the business, using an “off-the- shelf” process should enable best practice to be applied (1).
Against: while a standardised process is efficient – it is generally only applicable to a generic process and may not match an individual organisation’s values/context (1). While it can be used as a starting point, it would need to be adjusted (1)
Question 2.4 [6 Marks]
Retailery is an Australian apparel and general merchandise retailer. It operates across the country and has multiple stores in each state.
Recently, Retailery started introducing loyalty cards for its customers to gain a better understanding of their purchase patterns, and consequently enable more targeted offerings/advertising for their customers. To ensure that the process is more seamless, Retailery has decided to link the loyalty
cards to the credit cards their customers use. This is outlined and detailed in the Terms and Conditions that the customers are asked to agree to when they apply for the loyalty cards.
Two months into having the loyalty scheme in place, Retailery realised that the algorithm that they are using has managed to also link/track previous purchases on the same credit card(s) (prior to the introduction of the loyalty cards).
Advise Retailery if, on ethical grounds, they can use the data (collected prior to the introduction of the loyalty card) for targeted marketing. Your answer should outline two key (i.e., most important) ethical issues Retailery should consider in making this decision.
Need to argue on two key points (one of them MUST BE “consent) of the following: 2 marks each
Consent – argument as to whether the agreement to Terms and Condition constitute an informed consent. Further argument (and more importantly) no consent on the use of data collected prior to the introduction of the loyalty scheme
Privacy – collection of private information – e.g., credit card information linked to a specific customer
Security – no change to security – as information is collected within the same business Ownership – no change in ownership of the data
1 mark – for yes/no; 1 mark – summary of argument
Question 3 [16 Marks]
Stuff It Up Ltd is a manufacturer of luxury bedding, pillows, and cushions. The company has recently upgraded to an ERP system. A new staff member was tasked with entering all suppliers and related details into the system. Each supplier delivers ONE type of raw material. All products require multiple raw materials.
As the staff was uncertain about delivery lead times, she entered “5” (days) for each supplier as she was told that suppliers, on average, need five days to deliver their products. Not inputting any lead time was not an option as this was a required field. The new staff member intended to obtain accurate lead times later (on the same day) and to update accordingly but forgot to do this. Lead times vary significantly between suppliers (from 1-20 days). Assume the failure to update lead times is not detected.
Question 3.1 [5 Marks]
a) Do you consider the staff’s action with respect to recording lead times an error? Explain why or why not. (3 marks)
Not a typical error since intentional (1) but without intention to defraud the company (i.e., no fraud either). Staff purposefully entered a fixed lead time to circumvent a control (required field) (1) but intended to update later. (1)
NOTE: Possible argument: error – not coming back to fix it
b) What decision(s) made during the conversion cycle would be affected by this data problem? (1
Decisions related to production scheduling. (1)
c) What decision(s) made during the expenditure cycle would be affected by this data problem? (1
Decisions related to the timing of submitting purchase orders. (1)
Question 3.2 [4 Marks]
How would this data problem affect the performance of the conversion cycle? Identify two impacts on the cycle.
Material requisitions may not allow enough lead time to enable the materials to arrive in time for use in production. (2)
Alternatively, some raw materials may arrive too early and be subject to loss through theft or misuse and incur additional warehousing costs. (2)
Question 3.3 [4 Marks]
How would this data problem affect the performance of the revenue cycle of Stuff It Up Ltd?
Inability to produce products due to non-availability of raw materials could lead to stockouts (1) of finished goods inventories (1)
This affects the revenue cycle as goods promised to customers would not be available when required (1). Sales are likely to decline (1)
Question 3.4 [3 Marks]
Assuming no other data related issues, what would be the impact, if any, of the failure to update lead times on the faithful representation of two of the following financial statement accounts: Sales, Inventory, Cost of Goods Sold, and Inventory Write-Off? Provide a brief explanation for your answers
Sales – no impact (0.5) – because sales would be recorded as it occurs. If there is a stockout and sale cannot be made, there will be no impact (1)
Inventory – no impact (0.5) – recorded as it flows in and out of the warehouse (1)
Cost of Goods Sold – no impact (0.5) – recorded as sales occur – if sales don’t occur, no COGS
recorded (1)
Inventory Write-Off (0.5) – no impact – it will be recorded as it is written off – potentially more write-off due to bad inventory planning doesn’t mean it is not faithfully represented (1)
Question 4 [6 Marks] Question 4.1 [3 Marks]
Explain how the use of an ERP System (e.g., SAP) reduces the need for accountants to enter General Journal Entries and briefly discuss the associated impact on information quality. Use an example from the GBI case to support your answer.
While there are occasional journal entries required – due to the linkage between the process and recording, journal entries are automated (1)
Example: In Step 10, when payments are posted, journal entries are automatically recorded (1) VAC: completeness (all entries are recorded) and accuracy (recorded as it occurs), and potentially validity (no additional random entries) (1)
Question 4.2 [3 Marks]
Explain how the use of an ERP system (e.g., SAP) enhances management’s ability to monitor and control staff. Use either the GBI case or ERPSim to support your answer.
Audit trail allows managers to detect when and by whom each transaction was initiated/recorded.
Examples: P.O.s and sales orders indicate who created them; creation date is tracked. (1) This allows management to hold staff responsible and to evaluate their performance (1)
NOTE: 1 mark for example, 1 mark to explain monitoring; 1 mark to explain control
Question 5 [36 Marks]
Musicares is a charity that has been set up to provide financial support for Australian musicians who are experiencing financial hardships as a result of the COVID-19 pandemic. Musicians (either as a group or as individuals) can apply for a grant of $5000 per person.
Funds are provided by the government as well as from donations by charitable groups and/or individuals. There is an expectation that Musicares reports to donors how the funds have been distributed. There is a monthly limit on funds that can be paid out each month (based on donations). Beyond this limit, applications will be rejected. Applications are considered on a first-come, first- serve basis.
The grant is intended to be a one-off payment; therefore, each musician should only be able to apply and be granted the fund once. If their application is rejected due to lack of funds, musicians are encouraged to re-apply. Each application is thoroughly reviewed and checked by the Approver, an individual experienced in assessing equity-based grant applications for philanthropic organisations (e.g., equity scholarship grants, etc.) and has no ties to the music industry.
To apply for the grant, each applicant must provide the following details:
• Applicant name
• Indicate if the applicant is a group or an individual performer. If the applicant is a group (e.g.,
band), the applicant is required to provide the number of performers within the group
• Australian Business Number (ABN)*: this will be used to verify the validity of the applicant
• Contact details – email address is a required field
• Bank account details
• Supporting documentation including prove that the applicant has been working
professionally in the Australian music industry for at least 3 years, and contact details of at least two professional referees
*NOTE: each performing group and solo artist are considered as separate performing entities for ABN purposes. It is common for solo artists to also be associated with groups (e.g., bands). You can assume group members who are NOT also solo artists (i.e., they only perform as part of their band) would not have an ABN.
Three months into operation, Musicares noticed that there are significant left-over funds every month, even when the “Available grants (for the month)” datastore indicates that there is no fund left to grant. Moreover, Musicares has received multiple complaints from musicians about having their application rejected while they heard that some other musicians have received the grant more than once.
Question 5.1 [5 Marks]
a) Identify an appropriate process goal for the (sub-)process depicted in the flowchart and associated narrative. Explain why you have selected this process goal. (2 marks)
Process goal: pay the right person the right amount at the right time (1)
While it is not a typical purchase process, this is essentially the payable/payment sub-processes of the expenditure cycle (1)
b) Identify the economic event in the process and explain why it is an economic event. (1 mark) The grant payment to the applicants (0.5) as this is an economic resource outflow (0.5)
c) Is the payment processing sub-process (starting with symbol “Every Friday” and ending with symbol “Bank”) appropriate? Why or why not? (2 marks)
Automated based on existing information (pre-populated and no judgment involved at this stage) (1)
Question 5.2 [15 Marks]
a) Identify and describe any weakness in the process (as described by the narrative and flowchart) that could result in the significant left-over funds. Your answer should discuss how the weakness identified could impact the process and information quality goals. Explain any impact on the financial statements. (7 marks)
Issue: the available grants are not updated when applications are rejected (1)
This impacts the validity of the available grants (1) as a result of a completeness issue in not updating the available grants datastore (1)
– Alt: validity issue (1) at the application stage – recognising a future payment prior to approval (0.5)
Process goal not achieved: not paying the right person the right amount at the right time (1) as an application that could have been approved is rejected due to insufficient fund (1)
No impact on financial statement (1) as the payable is unaffected and application is updated appropriately (1)
b) What additional control(s), or change to the process, could Musicares implement to reduce this risk and achieve the relevant goals? Explain how this minimises the weakness identified. (3 marks)
Solution 1: only check and update available funds at the approval stage (1)
o Thistiesinwiththefirst-come,first-serveideabetterbecauseallapplicationsare
assessed in the order of submission (which achieved the goal of right person right time)
o Thiswouldpreventtheapplicationstoberejectedpre-maturelywhentherearefund available, which also ensures the validity goals (1)
Solution 2 (Alt): update the available funds when grants are rejected (1) o Thisensuresthevalidityoftheavailablefundsdatastore(1)
o However,thissolutionmaynotachievetheprocessgoalsaswhentheavailablefunds are updated, new applicants (e.g., on Friday) may be granted the fund first, where an applicant who applied earlier (e.g., on Wednesday) may have been auto-rejected due to lack of funds, despite the application being equally valid (1 – mark only awarded when this limitation highlighted)
c) Identify ONE performance measure (i.e., KPI) that could be used to evaluate the improvements after the introduction of the control (or process change) that you recommended in (b). (1 mark)
# of VALID applications rejected despite funds being available (1)
d) Explain how the performance measure (KPI) selected in (c) above relates to the process
objectives (2 marks)
Related to right time (1 – only mark for right time)
Measuring whether, when we have funds during the month, we have paid it out all applicable to valid applicants (1)
e) Describe how the performance measure (KPI) selected in (c) above would be calculated. Your answer should include what data is needed and where it would come from, and what would be the target be. (2 marks)
Look at rejected valid applications during the month vs. available funds (1) Target = 0 (1)
Question 5.3 [10 Marks]
a) Identify and describe any weakness in the process (as described by the narrative and flowchart) that could result in some musicians receiving more than one grant. Your answer should discuss how the weakness identified could impact the process and information quality goals. Discuss any impact on the financial statements. (5 marks)
As musicians (solo) could also be a part of a band, they essentially could apply more than once, with different ABN (1)
Process goal: impacts the goal of paying the right person (i.e., the grant should be given to the next valid applicant) (1)
Info quality goals: validity is impacted as the payment should not be authorised/made based on the rules of the grant (1)
No impact on financial statement (1) as payment was recorded appropriately (1)
b) What additional control(s), or change to the process, could Musicares implement to significantly reduce this risk? Explain how this minimises the weakness identified. (3 marks)
Requires group applicants to identify each individual performer (e.g., based on ABN) (1) When checking for existing applications, need to also look at it from the individual level (i.e., checking the members of each group) (1)
This would minimise the risks of an individual being granted the payment more than once (1)
c) Identify and explain the potential issue(s) that may arise as a result of your recommendation in (b) (2 marks)
*NOTE: 1 mark for identification issue; 1 mark for explanation
Sample answer:
If a musician is a part of two bands (but not a solo performer), they would not have an ABN (1) so they would either not get paid at all, or could be paid more than once (1)
Question 5.4 [6 Marks]
RPA Question: Due to the volume of the applications, the Approver must work overtime to ensure that they can hit the Friday payment deadline. Would it be possible and cost effective to implement RPA to assist the Approver? Explain why or why not. (6 marks)
No, it would not be possible to replace the Approver (1 – only if explained)
RPA is useful for standardised, rule-based task (1)
What the approver is doing requires assessment on supporting documents (there will be judgment involved) (1)
There will also be significant variations in format and type of supporting documentation, making it difficult to program (1)
Also not cost effective (1 – only if explained) as there is a limited pool of musicians, so even if RPA is implemented, it is not sus
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