ABSTRACT:

This case is designed for use in an accounting information systems or auditing class to supplement discussion of internal control within the payables transaction cycle. After completing the case, students should be able to design a system of effective internal control to reduce the risk exposures in a simple automated accounts payable system. The case focuses students' attention on several internal control issues that must be considered in an automated accounts payable system and should foster an understanding of the risk exposures inherent in an accounts payable system and the related internal control objectives. To accomplish this task, students must study systems documentation and apply existing knowledge of internal control concepts to recognize internal control weaknesses in the current system.

While the main emphasis is on-line edit checks, additional control issues are brought up in the case. The systems development process is examined to assess the appropriate level of involvement by auditors in the systems approval and development process. In particular, students should consider at what level of involvement auditor independence is impaired. This particular issue applies to both internal and external auditors that may be involved in the development process. The case also provides opportunity to learn how to use suspense files for storing transactions that fail to meet programmed on-line edit checks and how control measures ensure that the suspended transactions are corrected in a timely fashion. Finally, the case requires students to organize their thoughts logically and argue a position as they write a concise memo to management presenting and supporting their conclusions.