Case 5.4 St. James Clothiers
Memorandum
To: Betty Watergate CC: Sally St. James From: Kristen Kirby Date: 6/5/2012 Re: St. James Engagement
Confidential I HAVE REVIEWED THE NARRATIVES PREPARED BY JOE MCSWEENEY FOR THE NEW IT-BASED SALES APPLICATION PACKAGE FOR ST. JAMES CLOTHIERS. THE FOLLOWING ARE SOME CONCERNS, VALUES, AND RECOMMENDATIONS PER YOUR QUESTIONS.
Attached are a table of risks for the manual system and how the new IT system mitigates the manual system risks. The two biggest risks from my lists I felt were inventory miscalculations and fraud/theft from the cashier’s drawer. The inventory miscalculations are at a high risk because with the manual system they are only being counted once a month. The new IT system puts in place a master list that is automatically updated at the end of the each according to sales for the day. This will help to accurately know the inventory levels all the time and help to mitigate the chance of an over or understated inventory amount on the balance sheet. Fraud/theft were also high on the risk list for the manual system as more than one has access to the drawer, and even though it is only opened for sales it stated that by pressing the total button would also open the drawer. This to me seems risky for cashiers or salesclerk being able to quickly take money from the cash draw unnoticed and thus understating the sales in the general ledger as well as cash when it’s deposited. The new system will only open the drawer during a sale and you have to sign in with a specific password to be able to ring up the sale thus making individuals accountable for the cash drawer.
While you can see the various risks of the manual system according to the attached table, there are still risks for the new IT system. Since the system is computerized there is risk of no backup for the data in the case of a power outage or software glitch. The biggest risk I was concerned with is that the accountant
To: Betty Watergate CC: Sally St. James From: Kristen Kirby Date: 6/5/2012 Re: St. James Engagement
Confidential I HAVE REVIEWED THE NARRATIVES PREPARED BY JOE MCSWEENEY FOR THE NEW IT-BASED SALES APPLICATION PACKAGE FOR ST. JAMES CLOTHIERS. THE FOLLOWING ARE SOME CONCERNS, VALUES, AND RECOMMENDATIONS PER YOUR QUESTIONS.
Attached are a table of risks for the manual system and how the new IT system mitigates the manual system risks. The two biggest risks from my lists I felt were inventory miscalculations and fraud/theft from the cashier’s drawer. The inventory miscalculations are at a high risk because with the manual system they are only being counted once a month. The new IT system puts in place a master list that is automatically updated at the end of the each according to sales for the day. This will help to accurately know the inventory levels all the time and help to mitigate the chance of an over or understated inventory amount on the balance sheet. Fraud/theft were also high on the risk list for the manual system as more than one has access to the drawer, and even though it is only opened for sales it stated that by pressing the total button would also open the drawer. This to me seems risky for cashiers or salesclerk being able to quickly take money from the cash draw unnoticed and thus understating the sales in the general ledger as well as cash when it’s deposited. The new system will only open the drawer during a sale and you have to sign in with a specific password to be able to ring up the sale thus making individuals accountable for the cash drawer.
While you can see the various risks of the manual system according to the attached table, there are still risks for the new IT system. Since the system is computerized there is risk of no backup for the data in the case of a power outage or software glitch. The biggest risk I was concerned with is that the accountant