CHAPTER 11
.,r1..
-
!
' 'i
INTEGRATIVE CASE SEATTLE PAPER PRODUCTS
Seattle Paper Products (SPP) is modifying its sales department payroll sysiem to change the way it calculates sales commissions. Under the old system, commissions were a fixed percentage of dollar sales. The new system is considerably more complex,
with commission rates yarying according to the product sold and the total dollar volume of sales.
Jason Scott was assigned to use audit software to write a parallel simulation test program to calculate sales commissions and compare them with those generated by the
new system. Jason obtained the necessary payroll system documentation and the details on the new sales commission policy and prepared his program.
1
Jason used the sales transaction data from the last payroll period to run his pro-
gram. To his surprise, his calculations were 95,000 less than those produced by Sppt new program. Individual differences existed for about half of the company,s salespeo-
ple. Jason double-checked his program code but could not locate any errors. He
322
I
selected a salesperson with a discrepancy and calculated the commission by hand. The
result agreed-with his program. He reviewed the new commission policy with the sales mana8et line by line, and concluded that he understood the new policy completely.
Jason is now convinced that his program is correct and that the error lies with SPP 's new program. He is now asking himself the following questions:
I.
How could a programming error of this significance be overlooked by experienced programmers who thoroughly reviewed and tested the new system?
2.
3.
Is this an inadvertent error, or could it be a fraud?
What-qpn be done to find the error in the program?
lntroduction
This chapter focuses on auditing an accounting information system (AIS). Audiring is the systematic process of obtaining and evaluating evidence regarding assertions about economic actions and events in order to determine how well they correspond
-
!
' 'i
INTEGRATIVE CASE SEATTLE PAPER PRODUCTS
Seattle Paper Products (SPP) is modifying its sales department payroll sysiem to change the way it calculates sales commissions. Under the old system, commissions were a fixed percentage of dollar sales. The new system is considerably more complex,
with commission rates yarying according to the product sold and the total dollar volume of sales.
Jason Scott was assigned to use audit software to write a parallel simulation test program to calculate sales commissions and compare them with those generated by the
new system. Jason obtained the necessary payroll system documentation and the details on the new sales commission policy and prepared his program.
1
Jason used the sales transaction data from the last payroll period to run his pro-
gram. To his surprise, his calculations were 95,000 less than those produced by Sppt new program. Individual differences existed for about half of the company,s salespeo-
ple. Jason double-checked his program code but could not locate any errors. He
322
I
selected a salesperson with a discrepancy and calculated the commission by hand. The
result agreed-with his program. He reviewed the new commission policy with the sales mana8et line by line, and concluded that he understood the new policy completely.
Jason is now convinced that his program is correct and that the error lies with SPP 's new program. He is now asking himself the following questions:
I.
How could a programming error of this significance be overlooked by experienced programmers who thoroughly reviewed and tested the new system?
2.
3.
Is this an inadvertent error, or could it be a fraud?
What-qpn be done to find the error in the program?
lntroduction
This chapter focuses on auditing an accounting information system (AIS). Audiring is the systematic process of obtaining and evaluating evidence regarding assertions about economic actions and events in order to determine how well they correspond