Worksheet for Answering Questions 1 and 2Student Name:_____ Eyad Khoury 20170406 _____

Risks of Manual System How Risks Impact Financial New IT System Features that
Statements Mitigate Manual Systems Risks

The risk that staff could be This will effect sales directly The IT system can use RFID tags or
attempt to fraud by which will affect income and continuous numbering on inventory,
increasing sales count to makes it overstated which means if product number isn’t
get more bonus on system it won't count as a sale
The risk that the cash This effects the cash balance and The only way you enter is when you
drawer can be easily makes it overstated make a sale and there should be
opened by a button and staff extra control for ex: password or a
might steal from it supervisor checks on the register
The risk that staff (Cashier) This is a common mistake and The items should have a fixed price
might be bad at math or affects the sales directly even so there would be less
place and order for 100$ under or overstate corresponding misstatement or errors because its
instead of 10$ to the mistake that is made in the system

The risk that staff or This affects inventory and cost of The IT system counts inventory
customers can steal items goods sold which will effect daily and changes it when sales are
overall income made instantly

Case 5.4, St. James Clothiers, Auditing Cases 5th Edition, Copyright 2012 by Pearson Education, Inc. Upper Saddle River, NJ 07458
 The risk of segregation of If this is a money fraud like When staff has the ability to have
duty which means the same steeling from register it would custody, authorization and control
person who makes the sale affect the cash over money they might steal it. With
takes the money and IT systems there would be
records It and have custody segregation of duties and can trace
over it who stole what

Q3) An IT system might cause new risk for material misstatements if the person who installed the software intended to make it bad for
fraud or if employees don’t use it well. Another risk is that people can hack into the system and take cash without the company
knowing

Q4)I recommend hiring someone with excellent skills to know how to operate the IT system or teaching the staff how to use it
properly. Also, I would recommend that St. James Clothiers should prepare a structure related to the new IT system and to get rid of
the old machines

Case 5.4, St. James Clothiers, Auditing Cases 5th Edition, Copyright 2012 by Pearson Education, Inc. Upper Saddle River, NJ 07458