ACC 676 Module Two Case Study Guidelines and Rubric

Scenario

You are an IT auditor for Style for All, an upstart clothing company. They are attempting to cut costs while keeping their risks low. Given the two competing goals of cutting costs but minimizing risks, you must determine if this can be done based on their billing process. Your supervisor has asked you to come up with preventative controls to help minimize risks. You must examine various risks and come up with preventative controls to minimize them. In addition, you must consider the difference between manual and automated controls, as well as detective manual controls.

This case study will help you with Project Two, where you will be required to evaluate potential risk improvements for the identified risk areas and their impacts on the specific organization.

ACC 676 Style for All Billing Process

Style for All is a diverse upstart clothing company that wants to expand via social media. They are attempting to cut costs while keeping their risks low. Given the two competing goals of cutting costs yet minimizing risks, you must determine if this can be done based on their billing process.

Style for All's billing process is a function of the accounting department. The manager of shipping emails the accounting manager that goods were shipped to a customer. Accounting creates a sequentially numbered invoice which is sent electronically to the customer. Manual journal entries are posted to record revenue. Each day the accounting department creates an Excel report of the previous day's invoices. Using the Excel report, accounting evaluates all sales to ensure journal entries achieve the proper revenue cutoff and align with the expected results and sends the spreadsheet to the general ledger team to record the sales (debits/credits) and to ensure customers' accounts are properly updated for payments.

A simplified list of the steps of Style for All's billing process is listed below.

1. Shipping manager emails accounting manager that goods were shipped.
2. Accounting creates and sends an invoice to the customer.
3. Journal entries are posted to record revenue.
4. Accounting creates a report of the previous day's invoices.
5. Accounting ensures journal entries achieve the proper revenue cutoff.
6. Accounting sends the spreadsheet to the general ledger team to record the sales and ensure customers' accounts are updated.

Directions:

Part One: Controls

1. Provide a suggested preventative control to help minimize each of the given risks.

Risk: The risk is provided for you. You do not need to insert anything in this column.	Suggested Control:Replace the bracketed text with a full sentence describing the control you suggest to mitigate or minimize the risk described in the "Risk" column.
An order is shipped to a customer with a bad credit rating.	[Insert your response here.]
An invoice's quantity shipped does not match shipping documents.	[Insert your response here.]
Invoices contain different prices and/or terms than the customer expects.	[Insert your response here.]
Cash receipts from the customer are incorrectly applied to the wrong customer or invoice.	[Insert your response here.]
People who have access to incoming customer payments could intercept incoming cash and then create a credit memo to cover their tracks.	[Insert your response here.]
Manual journal entries are posted to wrong accounts in the general ledger.	[Insert your response here.]
Duplicate invoice numbers are assigned.	[Insert your response here.]

Part Two: Summary

1. Describe an additional risk related to billing and revenue recognition in addition to the risks provided.
2. Analyze the difference between manual and automated controls. Include the following in your response:
   1. The advantages and disadvantages of manual and automated controls
3. Describe an additional detective manual control that the organization could implement based on the risks described.