(Solution Manual) Accounting Information Systems

Gelinas,Dull,Wheeler, 11

Business

Solution Manual

11th Edition

• $15.00 $50.00

---

Description

Solution Manual for Accounting Information Systems, The downloadable file consists of 491 pages, and the total size of the file is 12.77 MB. Purchase now only for highly discounted price.

Author(s): Gelinas, Dull, Wheeler

---

---

Study Note Preview

Solution Manual for Accounting Information Systems, 11e Ulric Gelinas 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom us e. SOLUTIONS FOR CHAPTER 1 Discussion Questions DQ 1 -1 “I just want to be a good accountant, technology does not interest me.” Comment on this statement, considering today’ s technology environment. ANS. Possible points that could be made: a. Distinguish betwe en an accountant and a bookkeeper. An understanding of accounting software and related technology would enable one to advance beyond entry -level positions. b. Without knowledge of computer technology, an accountant can be a bookkeeper/accountant for a smal l firm that does not use computers at all . (With the ubiquitous nature of computers, this has become a weak argument, at best.) More realistically, with the low cost of accounting software, only very select organizations may not benefit from automation. Ex amples of those organizations would include businesses that sell a low volume of unique products. c. Because the ability to access data, present data for decision making, audit an accounting system, and so on are all affected by computer technology, the career path for an accountant will be severely limited by a lack of knowledge of computer technology. d. The public accounting profession is competitive and the effective use of technology helps maintain a competitive edge. For example, an auditor can usuall y complete an audit engagement in less time —and be surer of the findings —than he/she would be without using technology in the audit. This will permit the auditor to charge less for the work and to obtain more clients. And, if the auditor’s findings can be supported, he/she will be less likely to experience legal ramifications (e.g., from the SEC, from stockholders, and so on). e. The Sarbanes -Oxley Act of 2002 requires that the CFO (and CEO) sign the financial statements and attest to their accuracy, that c ompanies notify the Securities and Exchange Commission of material events within two days, and that companies file their earnings statements within 35 days of the end of a quarter. All of these requirements have implications for the organization’s accounti ng information system and the ability of the CFO to understand and monitor its operation. 2 Solutions for Chapter 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcep t for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. DQ 1 -2 Examine Figure 1.1. Based on any work experience you have had , with which elements are you least comfortable? With which are you most comfortable? Discuss your answers. ANS. See DQ 1 -3. DQ 1 -3 Examine Figure 1.1 . Based on your college education to date , with which elements are you comfortable? With which are you least comfortable? Discuss your answers. ANS. The point of both of these questions (DQ 1 -2 and DQ 1 -3) is to get the students to see the breadth of coverage of the AIS course and to see how the course will help fill in gaps in their background that they may have. Also, the figure and the discussion should help the student recognize the practical and acade mic background that needs to be brought forward into this course. For example, students with practical experience may have a good background in business operations, information processing, and management decision making. Students with computer coursework or practical experience may have background in databases and technology. If the students have completed intermediate accounting, accounting principles and reporting may be familiar. DQ 1 -4 Why might you have more trouble assessing the success of a not-for-profit organization or federal government entitlement program than you would have judging the success of a business organization? ANS. The purpose of this question is to get the students to understand the relationship of “success” and “accomplishing specif ic objectives.” The issues are similar for any organization. After we move beyond generally accepted, easily measured objectives, we will have difficulty determining effectiveness. We must establish objectives and criteria or indicators that can measure o ur success in achieving the objectives. A business organization either explicitly or implicitly establishes objectives such as market share, profits, and earnings per share. Measuring achievement of these objectives is fairly straightforward. The objecti ves for a federal government entitlement program or not -for-profit (NFP) organization are often subjective and may not be acknowledged by all parties. And measures of success may be elusive. For example, are programs for the NFP successful when the number of people assisted is high or when the number is low, or does it depend on the program? The Red Cross helps with disaster relief on a large scale as well as operating smaller programs such as a local blood drive. Or do we measure performance on the basis o f program costs per person assisted? Without an acknowledged set of objectives and measurable success criteria, we have difficulty knowing we have been effective. Accountin g Information Systems, 11e 3 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom us e. For non -private (governmental) organizations there is some guidance available to directly ad dress this issue. The Government Performance and Results Act of 1993 (P.L. 103 -62) was enacted to “provide for the establishment of strategic planning and performance measurement in the U.S. Federal Government.” To comply with this act, the managers of all agencies of the federal government must prepare five - year strategic plans setting forth the goals and objectives that measure mission achievement and the approaches that will be used in achieving those goals. Annual plans must include performance indicato rs and a statement of how measured values will be verified. A business, or any nongovernmental organization, may take on broader social responsibilities and establish related objectives. These objectives might include those for environmental impact, treat ment of employees, relations with unions, and impact on the surrounding community. Measurement of achievement of such objectives can be problematic. DQ 1 -5 Why must you have knowledge of a system’ s objectives to study that system? ANS. With this question, we try to establish the connection between a system’s purpose and its procedures. Understanding and evaluating a system’s procedures must be studied in light of the system’s objectives. For example, in an accounts receivable process, we periodically send customer statements and follow up on delinquent receivables found in those statements. Why? To ensure timely receipt of all outstanding receivables (i.e., an accounts receivable process objective). DQ 1 -6 Do you think your accounting education is preparing you effectively to practice accounting? Why or why not? Discuss, from both a short -term (i.e., immediately on graduation) and a long -term (i.e., 5 to 10 years after beginning your career) standpoint. ANS. This question is a follow -up to Discussion Questio ns 1-2 and 1 -3. The purpose is to see that some of the skills and areas of study in Figure 1.1 are short -term in focus and some are long -term. For example, accounting and auditing principles, business operations, and events processing are necessary entry -level skills. Management decision making, communications, and systems development and operation may be longer -term skills. DQ 1 -7 Examine Figure 1.9. Discuss the importance of horizontal information flows and vertical information flows to the daily operatio ns of a manufacturing entity. 4 Solutions for Chapter 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcep t for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. ANS. An information system captures and records data as business operations take place. This business event processing or horizontal information flow is the very basis of the AIS. From such horizontal flows, manufacturing enti ties would communicate between operations and inventory functions to ensure proper levels for current production. Similarly, operations would communicate with sales to ensure that needed products are being produced. The flows may take many forms, such as e lectronic inquiries or paper reports. Vertical information flows, derived from the horizontal flows, provide managers with information with which to plan, manage, and control operations. Manufacturing would provide data to be accumulated/summarized and us ed in vertical flows. The vertical flows then may be used in strategic and/or tactical decisions such as plant expansions or new product decisions. The accountant participates in the processes (summarize, calculate, filter, consolidate, etc.) necessary to produce the vertical flows. DQ 1 -8 Examine Figure 1.9. Discuss how vertical information flows may be important to the executive director of an organization that is a public charity. ANS. To provide direction to a public charity, the executive director ne eds to know vertically accumulated/aggregated information to provide guidance and accountability for the charity. The director would need to know information such as donor categories for contributions, total donations, total restricted donations, etc. Such information may also be required when attending board meetings and meetings with other constituents such as government agencies. Government agencies may have specific requirements at a considerable level of detail. Generally, most information from a publi c charity is publicly disclosed and accessible to the news media. The executive director needs to be apprised of anything that may be made public about which there may be questions. DQ 1 -9 Give several examples not mentioned in the chapter of potential co nflicts between pairs of information qualities. ANS. Note: Pairs discussed in the text include completeness and timeliness, and accuracy and timeliness. This question is open -ended and presents almost unlimited opportunities to analyze the “qualities” of i nformation and to explain them in context rather than merely regurgitating definitions. Accountin g Information Systems, 11e 5 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom us e. Tradeoff Example Timeliness versus accuracy and completeness Timeliness (e.g., accelerating the frequency with which reports are prepared) compromises several other qu alities. For example, shortening the delay between the actual shipment and reporting the data related to the shipment produces risks that the reported sales will be inaccurate and/or incomplete. Validity versus timeliness The time spent to edit informatio n to ensure its validity may sacrifice the timeliness of the information. For example, we may review all inventory receipts to ensure that all reported receipts represent goods actually received. When the edits are completed, the information may no longer be needed. Relevance versus accuracy Unless data is accurate, it may not be relevant for certain decisions. For example, sales recorded in the sales journal must be accurate as to quantity and price. On the other hand, sales reported for sales analysis ne ed not be so accurate. DQ 1 -10 Regarding financial reporting, which quality of information do you think should be superior to all other qualities? Discuss your answer. ANS. In Statement of Financial Accounting Concepts No. 2: Qualitative Characteristics of Accounting Information, the Financial Accounting Standards Board (FASB) elevated understandability to the status of being the overall goal of financial reporting. According to Concepts Statement No. 2, financial reporting procedures are to be chosen on t he basis of their capability to make financial information understandable to the decision maker. Certainly, the superiority of other qualities might be discussed. For example, in Figure 1.6 in this text, we elevated decision usefulness to a position super ior to understandability. We did so because we wanted to present a hierarchy germane to all decisions and decision makers and were not as concerned, as was the FASB, that financial information must be understood by a variety of users. DQ 1 -11 Comparing relevance and reliability, which information quality is most important? Support your answer with examples. ANS. Note: To answer this question, first review the definitions given in the chapter to make sure to use the terms as they are defined here and not as they might be used in general practice. Relevance is defined as “information capable of making a difference in a decision -making situation by reducing uncertainty or increasing knowledge for that particular decision.” Reliability is defined (in Exhibit 1.2 ) as “relates to the provision of appropriate information for management to operate the entity and for management to exercise its financial and compliance reporting responsibilities.” First, we can say that relevance addresses a decision to be made in ter ms of reducing uncertainty (or increasing knowledge). The uncertainty being reduced must be relative to the knowledge already possessed by a particular decision maker for a particular decision. Reliability does not refer to specific decisions (or 6 Solutions for Chapter 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcep t for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. decision makers). So, for a specific decision and decision maker, relevance is most important. Second, we can say that reliability refers to some externally imposed constraints (e.g., regulatory bodies, laws). For example, organizations with stock publicly traded in the United States must adhere to the rules for financial reporting prescribed by the Securities and Exchange Commission and the Financial Accounting Standards Board. Generally Accepted Accounting Principles (GAAP) would, for example, require that histor ical cost be used to report the dollar value of assets held by an entity. Historical cost information may not be “relevant” for some decisions, but it is “reliable.” DQ 1 -12 Describe two structured decisions and two unstructured decisions. Discuss the relative amount of structure in each decision. ANS. Structured decisions: a. Approving credit. b. When and how much inventory to reorder (an example from the chapter). c. Capital budgeting. Decision type a probably occurs more often than b, and b more often th an c, making decision type a more repetitive and probably more structured than b (and b more than c). In addition, the criteria and data used for decision type a are probably more certain than they are for b (and b more certain than c). Unstructured decis ions: a. Acquire or merge with another company. b. Select a new product or line of business. c. Select a marketing campaign. As with our list for structured decisions, these types of decisions occur with differing frequency in a typical business. For examp le, a typical business selects a marketing campaign more frequently than it selects a new product or line of business or merges with another company. And the criteria and data used to decide if and how to acquire another company are probably the most uncer tain, which makes that type of decision the most unstructured. DQ 1 -13 “To be of any value, a modern information process must assist all levels of management.” Discuss . ANS. This question addresses the value of an information process. An information proces s can be of value at each and every level in the organization by providing information useful in making decisions (see Figure 1.6). As the information process provides information possessing qualities useful at higher levels in the organization, it acquire s a greater value. However, an information process possesses value by simply monitoring business operations through collecting and recording business events. Short Problems SP 1-1 ANS Accountin g Information Systems, 11e 7 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom us e. 1. C, D Note: Bruce is attempting to accomplish timeliness but is work ing with a report that lacks relevance because it is out of date. 2. E Note: Without a customer order a shipment is not authorized and not genuine. 3. B Note: Not all shipments are entered. 4. A Note: Every order is recorded (so completeness is achieved) b ut every order is not recorded correctly (so accuracy is not achieved). 5. A Note: Data on some of the picking tickets is incorrect. SP 1-2 ANS Efficiency of a retailer can be reduced if any of the listed qualities are missing. Time can be lost through se arching for nonexistent inventory when the system information is not updated in a timely manner, completely entered, or inaccurately entered. If these qualities are missing, excessive quantities may be stocked, yielding additional costs (such as warehouse and insurance) associated with the excess quantities. Effectiveness of a retailer can be increased (or decreased) by the level of accuracy, completeness, or timeliness of inventory information. If the information is not updated in a timely manner, there ma y be stock -outs and lost sales. Incomplete information can cause customers to go elsewhere, if the system indicates insufficient inventory for the customer need, when in reality, receipts were not entered, meaning the information is not complete. Inaccurat e information, such as incorrect pricing, can contribute to lost profits for the company. Each of these items can reduce the effectiveness of an organization’s ability to provide products to a customer at a profit. Problems P 1-1 ANS. Regarding the quote b y Robert K. Elliott, the following points could be made: • As discussed in this chapter, identifying relevant information requires understanding the decision maker and the decision being made. • Modeling systems and designing systems to obtain needed informati on is consistent with the role of designer of information systems discussed in this chapter. • Advising on controls and security and ensuring information reliability are consistent with the role of the accountant as an evaluator of information systems, as di scussed in this chapter. • This chapter makes the point that the accountant must understand a broad context of organizational issues. The portion of this quote that talks about 8 Solutions for Chapter 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcep t for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. deploying knowledge includes a number of those contexts, such as strategic planni ng, marketing, and daily operations. • The chapter does not disagree with the quote. • We do think that accountants must provide these services or be marginalized by those who will. And, as discussed in this chapter, the accountant is uniquely positioned and q ualified to provide these services. Students may have a variety of opinions here. • We might also mention that a potential conflict of interest could arise if any accountant (or firm) performs any design or consulting work and also performs attestation for t he same client. In fact, SOX Section 201 prohibits a CPA firm that audits a public company from engaging in certain nonaudit services with the same client. P 1-2 ANS. First, to be qualified to perform such services, the accountant must be familiar with the nonfinancial information being reviewed. To perform an audit of financial statements, for example, the accountant must be familiar with financial accounting theory and practice. To be qualified to perform assurance services, an accountant must be familiar with the subject matter of the engagement. Subject areas may include risk assessment, strategic planning, quality control, process improvement, and customer and product productivity. Second, to perform an audit, an accountant must be familiar with auditi ng standards, principles, and practices. Assurances services, on the other hand, may be governed by different standards and will require different skills than those required for an audit. Certainly, the assurance services practitioner will depend more on c ommunication and teamwork skills than ever before. Also, additional evidence gathering, analysis, and information technology skills will be required. Examples of such skills include statistical analysis, market research, and facility with database manageme nt systems. Finally, performing these services can provide an interesting variety of work engagements for the accountant as well as additional sources of revenue. P 1-3 ANS. For Sarbanes -Oxley –related work within the accountant’s own organization, answers should address documenting systems, performing risk assessment, evaluating internal controls, and so on. For work outside the accountant’s organization (e.g., for clients), answers should address the assistance given to prepare clients for the Section 404 review. Accountants can do such work for their audit clients without violating the requirement that they not undertake consulting for their audit clients, provided they limit the work to documentation and risk assessment. An accountant can help only a non-audit client design a system of internal controls to correct control weaknesses. Finally, the auditor will be reviewing the management assertion required under Section 404 during the annual audit. For this work, they will be reading documentation, perform ing risk assessment, and entering an opinion on the functioning of the system of control. Accountin g Information Systems, 11e 9 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom us e. P 1-4 ANS. Note: This solution assumes that the daily and monthly reports are prepared by the central information services function, are provided by software develope d and tested by systems development personnel, and are provided to a number of users. It is useful to know which, if any, of the outputs contains historical information and to know the purpose (e.g., decision) for each output. Before going over this proble m, an instructor may want to test these assumptions with the class. Quality Inquiry Daily Monthly Understandability User can control format. User may not be able to control format. User may not be able to control format. Relevance Information may be tai lored for the user. Information may be intended for a number of users. Information may be intended for a number of users. Timeliness Most timely. Second most timely. May not be timely for some decisions. Predictive value/feedback value User may be able t o modify each report to perform “what -if” analysis and to incorporate his/her own earlier expectations. May not provide for “what -if” analysis and may not incorporate the decision maker’s personal prior expectations. May not provide for “what -if” analysis and may not incorporate the decision maker’s personal prior expectations. Neutrality/freedo m from bias A single user’s assessment may not lead to neutral information. Central control and preparation for multiple users may lead to increased neutrality. Central control and preparation for multiple users may lead to increased neutrality. Comparability Because one user has prepared this information for himself/herself and with little, if any, central control, the information may not be comparable to other inf ormation. Information centrally controlled and provided to a number of users may be comparable to other information. Information centrally controlled and provided to a number of users may be comparable to other information. Consistency Because the manager can formulate each query differently, consistency is suspect. Centrally controlled reports that have been tested, and change little over time, should provide consistent information. Centrally controlled reports that have been tested, and change little over time, should provide consistent information. Validity Information may not have been checked for validity. Controls may increase validity of this information. Controls may increase validity of this information. Accuracy Information may not have been checked for accuracy. Controls may increase accuracy of this information. Controls may increase accuracy of this information. Completeness Least complete. Average completeness. Most complete. 10 Solutions for Chapter 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcep t for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. P 1-5 ANS. Every student’s answer will likely be different. Many job listing sources are available. Students may use general sites such as www.monster.com or specific sites for accountants such as www.accounting.com. Governmental sites and sites for specific companies are also available. Many listings will have specific job requirements. The student should list the job requirements, his/her current abilities, and the steps to bridge any gaps. The steps may include college courses, technical courses, certifications, or any other applicable learning experience. P 1-6 ANS. A wide range of answers are likely, based on the firm interviewed. Most professional organizations have information on what is expected in general (see IFAC#11 or www.aicpa.org). Individual firms may have slightly different expectations. Small firms may ha ve lower (or higher) expectations based on their client base and services offered. Larger firms may have different expectations based on their training programs (possibly lower expectations if they intend to train employees on firm methods and procedures). The expectations may differ significantly based on the level of job discussed. P 1-7 ANS. This solution will vary based on the current listing of the top technologies. P 1-8 ANS. This solution will vary based on the current listing of the top technologies . P 1-9 ANS. An excellent resource for this problem is the AICPA’s report, Characteristics and Skills of the Forensic Accountant, available at http://www.aicpa.org/interestareas/forensicandvaluation/resources/practaidsguidance/downloada bledocuments/forensicaccountingresearchwhitepaper.pdf In this document a wide range of skills are identified, in cluding: • Simplification of information: which may be accomplished using computer tools such as database extractions (SQL) or summarization and graphics (Microsoft Excel). • Auditing skills: it is impossible to audit an AIS without some knowledge of technolo gy and controls. • Synthesize results of discovery and analysis. Again, frequently graphics. • Research skills: Today, most information is stored electronically, and it is necessary to use technology to identify and access information. • Asset trac ing: using onl ine searches of real estate documents and tax payments. • Electronic discovery: It is impossible to extract data from a hard -drive or mobile device for use in a court case without technical expertise. • Internal controls: Many (if not most) are implemented usi ng an organization’s AIS. Accounting Information Systems, 11e 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole o r in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. SOLUTIONS FOR CHAPTER 2 Discussion Questions DQ 2 -1 After the core of an ERP system has been implemented, any of the modules may then be implemented separately. What is the implication of being able to implement an ERP system on a piece -by-piece basis? ANS . An advantage of being able to implement individual modules is that you can choose best -of-breed software. Also, a partial implementation can be done more quickly and the benefits received earlier. The remainder of the implementation can proceed as needed and as resources permit. A disadvantage might be that you may not experience the benefits of full integration and may need to create links between modules from different vendors. DQ 2 -2 The Tigris Company is considering taking customers’ orders on its We b site. a. What information would Tigris collect from the customer during this process? b. What information would need to come from Tigris’ Web and back -end systems to complete the order? c. How would an enterprise system facilitate this exchange of inform ation? ANS. a. Collect customer number or name. If this is not an existing customer, Bluffs would need customer address, contact information, and so on. Bluffs would also need to collect the product codes and quantities that the customer is ordering. b. Information needed may include open orders, previous orders (for preferences), credit status, requested item availability and promised delivery date, ship -to address, and bill -to address. c. An enterprise system makes this process timely and seamless. The cu stomer would not see or experience problems related to the collection and display of this data. Although this would be true of well -integrated legacy systems, an enterprise system should be able to exchange more information with a Web server in a timelier manner and with a higher level of data integrity. 2 Solutions for Chapter 2 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed wit h a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. DQ 2 -3 Periodically, you will read in the news about one company in the ERP industry acquir ing another company in that industry. Discuss the pros and cons of consolidation of the ERP software industry. ANS. Pros include enhanced functionality of individual products as vendors incorporate the features of several products into one. An organization can do one -stop shopping for multiple packages with one vendor. This should lead to fewer problems when integratin g different vendors’ products. Large vendors are presumably more stable than the smaller, acquired vendors that would have been on their own. Cons include limited ability to shop and compare among competing products. An ERP system has limited capability t o distinguish an organization from others in the industry (i.e., every player in an industry uses the same package). DQ 2 -4 Describe how an enterprise system can assist an organization in optimizing its value system. ANS. In general, an enterprise system p rovides data from across an organization’s functions and permits optimal planning and decision making. For example, by providing worldwide visibility of inventory balances, as well as customer and vendor data, orders from customers can be sourced in a way that balances purchasing (and possibly manufacturing) costs with shipping costs while considering the value provided by making the sale and retaining customer good will. The enterprise system should also be able to exchange data with trading partners to obtain the benefits of sharing information and planning with business partners upstream and downstream in the value system. For example, buyers in one organization can give advance notice of planned purchases so that upstream vendors can plan shipments to t he customer. DQ 2 -5 Consider a business process that you have experienced at work, as a customer, or as a student. Examples might include any process in a work setting, such as payroll and purchasing, or any process with which you have interacted, such as ordering from a Web site, obtaining a loan, eating at a restaurant, or registering for classes at your college or university. Describe the degree to which the steps in the process are integrated. What is/was the impact of that integration on you and on the organization? ANS. The purpose of this question is to get students to appreciate the impact of process integration, or lack thereof, on organization employees, customers, and students. The students might cite such issues as waiting time, re -entry of data, errors, and the interdepartmental communication. One example of integration that students may have experienced is the connection between student accounts, where their tuition and other fees and payments are recorded, and the college/university registratio n system. This integration should prevent students with overdue accounts from registering for courses. Accounting Information Systems, 11e 3 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole o r in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. DQ 2 -6 Describe a situation in which information would be shared between two of the “silos” in Figure 2.2. What data would be shared? Why would the data be shared? ( Hint: You may want to refer to Figures 2.3, 2.7, or 2.10 in the text.) ANS. This solution includes only a few examples. The experience and background of the students will dictate the quantity and nature of their responses: • Finance and accountin g must share accounting data about outstanding accounts receivable and payment history with marketing and sales to determine the creditworthiness of the customer before an order could be accepted by the sales system. • Logistics needs to provide marketing an d sales with current inventory balances and the time to pick, pack, ship, and deliver the goods so that the customer can be informed as to the expected delivery date. • To establish a production schedule, production requires data from purchasing about the av ailability of materials from vendors. • A treasurer must have information about expected purchases, open purchase orders, open vendor invoices (accounts payable), expected sales, open sales orders, and open customer invoices (accounts receivable) to project cash flows. • Marketing must have information from purchasing and manufacturing to establish prices. • Logistics must have sales information by geographic region to plan for new warehouse facilities. DQ 2 -7 Why might a firm decide to implement only certain mod ules in an ERP system rather than a complete implementation? ANS. Discussion of this question should begin with recognition of the complexity of ERP systems and the difficulty and time required for a full -blown implementation. Many organizations will decid e to implement a few modules to solve major problems or challenges that already exist. After initial modules are in place, a company will make the decision whether to implement further modules immediately, later, or perhaps not at all. Partial implementati ons, of course, sacrifice some level of integration of the total organizational information process. Also, some organizations may not need all of the modules (e.g., a retailer would not need the manufacturing module). DQ 2-8 In what circumstances would a c ompany choose a best -of-breed approach over a traditional ERP system? 4 Solutions for Chapter 2 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed wit h a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. ANS . A company would choose a best -of-breed approach if their process is nonstandard, and available third party software provides a significantly better method of handling that process. The company would need to have internal (or external) technical capability to integrate and support upgrades of the individual components of their best -of-breed system. DQ 2-9 Describe the primary and supporting activities involved in an organization ’s value chain. Explain the importance of having an effective value chain. ANS: A value chain is a series of activities, or business processes, performed by an organization to transfer inputs into outputs valued by customers. Primary activities include those d irectly involved in marketing, selling, producing, and delivering goods and services to the customer. Secondary activities include functions such as procurement, IT, human resources, and accounting, and they provide the supporting infrastructure to enable to primary activities. A value chain turns these individual activities into an integrated business process. An effective value chain is very important because an organization increases its competitive advantage in the marketplace by providing the most valu e to customers. Short Problems SP 2-1 ANS. Who: Information identifying the customer and the salesperson. What: Information identifying the inventory items and quantities ordered. Where: Information identifying which warehouse will supply the goods and where the salesperson entered the order. We also want to know where the customer wants the order delivered. When: Information identifying the date and time that the order was placed and that the warehouse and shipping department were notified of the pendi ng order fulfillment. We also need to know when the customer requires delivery. SP 2-2 ANS . More data is available to be easily linked together and used to create information in enterprise systems. On that premise, we offer the following examples: (1) A warehouse manager has the ability to look at sales orders that have not yet been shipped to follow up and find out why. Without an integrated enterprise system, the manager may not have access to this information and therefore would not know that there may b e a problem. Enterprise systems allow for early detection of potential problems, which may prevent customer dissatisfaction. (2) The credit manager may want to compare customer credit limits with sales, billing, and payment data to determine whether credit limits need to be adjusted. If a customer has a habit of making late payments, the organization may need to evaluate Accounting Information Systems, 11e 5 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole o r in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. whether his credit limit needs to be lowered until outstanding balances are settled. Without the ability to compare all of this linked inf ormation, the company could be extending credit to customers that will ultimately become uncollectible. Enterprise systems allow decision makers to proactively reduce unnecessary expenses. (3) A logistics manager may examine the time of day orders are received and delays in shipping those orders to determine whether staffing in the warehouse needs to be scheduled at different times. With a nonintegrated system, the manager may not be able to compare this information and may choose to overstaff during “down” times and understaff when employees are needed to receive deliveries. Examining this data allows for the most efficient use of the organization’s resources because adequate staffing is made available when work is available. SP 2-3 ANS. An example of a bus iness event is a clothing store (e.g., Gap) selling a shirt over the Internet. Its enterprise system allows data sharing across the many business processes that must occur to complete the sale. The company may automatically access its warehouse database to determine whether or not the item is in stock or back -ordered. Once the customer enters his shipping/billing information, the database can automatically determine shipping costs and expected delivery date. The billing information is verified by the accoun ting process, so the customer is charged immediately. The shipping department receives the order details and can process the request for immediate shipping. Without an enterprise system, all of this data could not be shared throughout the organization, and the selling process would be delayed. Similarly, an example of a business (purchase) event is an electronics store (e.g., Best Buy) purchasing inventory from manufacturers. The inventory manager has access to databases that provide him information about i nventory quantities. When he sees that there are items that are low in quantity, he prepares a purchase order. Purchase orders must be approved by appropriate personnel before they can be placed. The system will look up the purchasing limit of the individu al placing the order and check to ensure that the amount does not exceed that limit. The company can then access its vendor database to determine which vendors can supply the inventory at the lowest price. Once the purchase order is approved and processed, the information is updated to the accounting system so that the records reflect this purchase and payment can be made. Without sharing all of this data, managers of different departments may not know what items are close to being out-of-stock and need to be ordered. It is crucial to have sufficient inventory to maintain a competitive advantage and keep customers from shopping elsewhere. SP 2 -4 ANS. The overall benefit of an enterprise system is the connectivity of modules and the capability to bring relate d data together in one system. While extracting data from an enterprise system may be complex, for a forensic accountant that complexity is MUCH lower than extracting data from disparate systems then pulling the data together to look for anomalies. In the example given, one could look at sales throughout a region over time and see that only one unit had sales after closing (it might be possible that seasonally, the standard closing time changes 6 Solutions for Chapter 2 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed wit h a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. and late sales are not uncommon.) If each store had its own sys tem, then the data would have to be combined to see the pattern that is inconsistent with the others. Unless suspecting the issue, the investigator may not have any reason to go to the trouble of combining the data, and therefore overlook the issue. In gen eral, the enterprise system makes it easier to analyze data occurring throughout the organization. Problems P 2-1 ANS. Students should find one or more of the ERP disaster stories such as those that occurred at Hershey, FoxMeyer, and Whirlpool. In addition , they should find stories related to successful ERP implementations such as Indian Motorcycle Company of America and Cisco Systems, Inc. Factors leading to successful or failed implementations might include the following: • Allocation of adequate resources (people and money) • Sponsorship and monitoring by upper management • Realistic timeline • Fully defined system requirements • Organization culture that embraces change • Synchronization of business processes with ERP functionality (perhaps re - engineering) before ER P implementation • Managing the risk of implementation failure • Adequate testing before implementation • Training for all who will use the ERP P 2-2 ANS. Because student responses will depend on the package that they select, no solution is provided for this pro blem. P 2-3 ANS. Because student responses will depend on the package that they select, no solution is provided for this problem. P 2-4 ANS. Expect students to include steps similar to those included in this chapter, including the following: • Step 1: A cust omer can log on to a Web site and perform inquiries as to price and availability of items. The Web site might perform presales activities such as collecting and retaining customer (or prospective customer) data. • Step 2: The customer enters his or her own o rder, and the Web site notifies the customer as to availability and expected delivery date. In addition, the customer enters credit card data. • Step 3: The pick and pack steps are probably transparent when purchasing from a Web merchant. Accounting Information Systems, 11e 7 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole o r in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. • Step 4: Although we can’t see the shipping step, we would know the carrier that will be used. • Step 5: The invoice (confirmation of credit card charge) will be printed with the picking, packing, and shipping documents and will be included with the shipment. • Step 6: The goods are paid for when the customer enters the credit card data. Still, a student might indicate that they make a payment at a later date to their credit card company. • A purchase from a Web merchant might include additional steps, not included in this chapter, such as receiving an e -mail confirmation, receiving additional e-mails as the goods are picked and shipped, and using a link to the carrier’s Web site to conduct a query to determine the status of the shipment. P 2-5 ANS. Before we can determine if the fur niture manufacturer needs an ERP system we need to learn more about its characteristics and information requirements. Here are some sample questions that would need to be answered: • Do they manufacture for stock or only for special orders? • Quantities: Emplo yees? Line items in inventory (parts, supplies, and end items)? Number of regular customers? Number of vendors? Number of invoices sent each month? Number of vendor invoices each month? Number of vendor payments? • Who keeps the accounting books, local CPA o r in-house? • Information required: Inventory? Marketing? Pricing? Cash flow? Manufacturing (bill -of-materials, production schedules, work -in-process)? P 2-6 ANS. This answer will depend on the organization the student selects. P 2-7 ANS. If the company used is Airgas, the following is a suggested solution: (Answers would likely be similar for most other companies.) • CRM —for retail sales, the company can keep track of the customer’s name and contact information. Periodically, they can send new product informa tion, offer “existing customer” specials, and send offers when nearing the expected life of the product. The CRM also makes customer self-service purchasing easier for returning customers. For wholesale customers, tracking the units sold (number and date b y product), pricing, and customer contact information provides information for follow -up sales and future pricing and quantity decisions. 8 Solutions for Chapter 2 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed wit h a certain product or service or otherwise on a password -protected website or school -approved learning management system for classroom use. • SCM —as the company is in growth mode, demand planning, acquiring inventory, distribution and selling are keys to succe ssful growth. Constant stock -outs frustrate customers, and drive them to other suppliers. Brand loyalty is lost, as is the potential for growth. • PLM —the company’s technical focus generally indicates a shorter product life cycle. This increases the importan ce of managing the life cycle to have new and innovative products ready when the current lines become obsolete. Likewise, environmental technology should be considered to minimize impact at the end of the working life of the product. • SRM —helps in the requi sition of products and contract management, and ultimately keep quality up and costs to a minimum. In a growth stage product sourcing (quality and costs) may have a big impact on short -term and long -term profitability. Developing goodwill with reliable ven dors is also an important part of any company that provides products to consumers. Accounting Information Systems, 11e 1 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed with a certain pro duct or service or otherwise on a password -protected website or school -approved learning management system for classroom use. SOLUTIONS FOR CHAPTER 3 Discussion Questions DQ 3 -1 The business environment is increasingly demanding the use of OLRT systems for more up -to-date information. Identify one business process and the environment in which it would be used as an example of why immediate mode processing is so critical. Be prepared to explain your answer to the class. ANS. Your students’ answers will vary greatly on this rather open -ended discussion question. As an example to use in class, you might consider something like the lottery. In a recent Powerball lottery, the winning ticket garnered a $195 million jackpot. Consider the importance of knowing which store had the winning ticket, knowing the exact number of tickets that have been sold as of the drawing in order to report th e amount of the jackpot at the drawing, verifying the authenticity of the ticket, and so forth. You may want to pick a more accounting -oriented example; however, students will likely find the lottery discussion interesting, and attention may be piqued. DQ 3-2 Consider a business where you shop. Could it operate without automated information systems? Why or why not? ANS. Your students’ answers will vary greatly depending on the specific situation they select for discussion. However, we expect that the answer will generally be “no.” Typical reasons may include items such as terminal cash registers (needed to scan bar codes to look up prices, compute taxes due and total orders, and, unfortunately, sometimes to tell the clerk how much change to return!), as well as service station fuel dispensers that are computer controlled and linked to the information systems. DQ 3 -3 Consider your favorite fast food chain restaurant. How do you think this restaurant might use OLTE to improve its business event data -processing activities? Explain. ANS. Your students’ answers will vary greatly depending on the specific situation they select for discussion. However, issues that might be discussed may focus on why some of the larger chains use online transaction entry. A few exampl es include the following: • As purchases are keyed into the cash register, it will generate the pricing information, applicable sales tax (or V AT, GST, etc.), totals, and so on. 2 Solutions for Chapter 3 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school-approved learning management system for classroom use. • As customer payments are entered into the cash register, the balance of the enclosed cash is maintained and can be used to balance the drawer upon a change in operator at the end of a shift or rotation. • Overnight, the record of purchases is downloaded from the local store to a central location where replenishment inventory needs can b e determined and shipment orders are automatically generated. • Issues of how the information can be used for various functions will also reinforce the use of information for decision making discussed in Chapters 1 and 2. For instance, capturing data can all ow subsequent analysis of peak loads and can be used to determine optimal staffing of the store. DQ 3 -4 How does (or could) your university bookstore use technology to improve customer interactions with students, faculty, and staff? ANS. The bookstore is a retail business with some unique customers. Faculty select materials for a course, and then the bookstore orders the quantity perceived to be sellable. Technology used on other businesses can be adopted, as well as unique solutions to facilitate communica tion. A few examples include the following: • Instructors enter textbook adoptions online. This should ensure that the proper materials are ordered. • Students and faculty are notified via e -mail when materials arrive for specific courses. (Students are enroll ed in the course, and the faculty is the instructor for the course.) • The preceding notification combined with a real -time inventory could prevent wasted trips in search of course materials. It will also give faculty advance notice of problems that students may be facing. • If the bookstore returns profit to the school, the benefits the school receives from the store could be publicized, possibly through a Web page. This could provide a more positive view of the enterprise and pricing policies. DQ 3 -5 What are some of the advantages and disadvantages of conducting business on the Internet? Be prepared to explain your answer. ANS. Some of the key advantages (in no order of importance) that might be included in your answer are the following: • Business events can b e completed without the participation (i.e., expense) of a salesperson. • Customers, without a salesperson’s aid, can review order options in detail (including price variations) before deciding on an order. For instance, computer vendors will allow customers to add and delete options to evaluate the cost implications of different PC configurations. Accounting Information Systems, 11e 3 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed with a certain pro duct or service or otherwise on a password -protected website or school -approved learning management system for classroom use. • Customers in geographically dispersed regions can be reached more easily, enlarging the potential markets for a company’s goods or services. This includes internat ional markets. • Pictures and/or videos demonstrating a company’s products can be made available over the Internet to allow the customer to better evaluate a project. Some of the key disadvantages (in no order of importance) that might be included in your a nswer are the following: • Security is the single biggest concern for customers (and businesses) participating in Internet commerce. Often, customers will decide to call in an order after viewing goods or services over the Internet —rather than make payment i nformation available over the Internet. • Globalization of competitors means that there will be more competition for customers. • For the customer, there is often insecurity as to whether an electronic storefront really has a store behind the front. Sometimes, a fake vendor will set up shop to gather credit card numbers for illicit use. • Some goods and services are not easily transacted over an electronic medium and could be better handled using alternative communications processes. DQ 3 -6 Why is it important to have standards, such as X12 and EDIF ACT, when conducting EDI transactions and other forms of e -business? Is there a downside to using standards? ANS. Without standards, there is little difference between EDI and sending e -mail orders. For example, organiz ations must have intelligent software or humans reading and interpreting orders. Such an environment is error -prone and much slower than standards -based interactions. The other side of the argument is that standards do make change slower and more difficul t to implement. New standards either have to be backward compatible with previous standards, or those systems based on older standards have to be modified to deal with the new standards. DQ 3 -7 How does Internet EDI differ from traditional EDI in process? In result? Process: Traditional EDI, includes the use of V AN’s, which include a mail -forwarding function. It is a closed network, and should be secure. IEDI uses the Internet for message transmission, which may be less secure than a V AN, but also less c ostly. IEDI does not require the message forwarding, but rather, uses Internet messaging. 4 Solutions for Chapter 3 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school-approved learning management system for classroom use. Result: The result of both approaches should be the same. DQ 3 -8 Discuss the benefits of SOAs to the growth of e -business. ANS. Connectivity to networks is ubiquito us. The number and types of devices that are network compatible is constantly increasing. To take advantage of these devices and market to their users, product providers must be capable of communicating with virtually any available device. SOA systems prov ide, through Web Services, the infrastructure to communicate between a business and a device, without having to modify the business application for every available device. This capability to communicate with the expanding array of devices, without modifyin g the core systems, allows businesses the potential to expand their markets. DQ 3 -9 Why has the Internet enabled an explosion in e -business when EDI has been available for decades? ANS. A number of issues can be raised to explain this particular phenomenon . We discuss a few of these briefly here: • Electronic data interchange (EDI) can be an expensive process to implement, and for many businesses (and especially when that cost is passed on to consumers), it is simply too expensive to warrant its use. • The Inte rnet, and Internet -based technologies such as XML, provides a very low-cost alternative for electronic communication —including e -commerce. • The Internet is a less complex media, which makes its use more approachable by more participants. • EDI has never reall y been available to individuals, whereas the Internet is very accessible to a large number of customers (or potential customers). DQ 3 -10 One of Amazon.com’ s marketing strengths is the capability to collect and analyze customer purchase data. How does this add value to the company? From the customer’ s perspective, is value added? ANS. Amazon.com can use customer purchase relationships to identify products that may interest customers. Simplistically, if Customer A buys Books X, Y , and Z, and Customer B buys Books X and Y , Amazon.com can suggest Book Z to Customer B. A sophisticated program that can make the suggestion based on all customers’ purchasing history can provide a competitive advantage to the owner. This type of customer service not only can increas e sales immediately but can also have lasting effects through increased customer satisfaction if the customer purchases and enjoys the recommendation. Accounting Information Systems, 11e 5 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed with a certain pro duct or service or otherwise on a password -protected website or school -approved learning management system for classroom use. If the customer is searching for books and information on a topic and Amazon.com makes appropriate sugge stions, based on that customer’s prior purchases, the customer does receive value from the process. DQ 3 -11 Some potential e -business customers have security concerns regarding online purchases. How do Internet security certifications attempt to address th ese concerns? ANS. Assurance services, such as WebTrust, provide the vendor with a certificate (seal) to display on a Web site. The consumer can click on the certificate to confirm its validity and expiration date. For WebTrust, the consumer can read the C PA’s assurance report on the site and the policies and procedures that are covered by the seal. This external assurance can provide confidence that the company provides stated security and privacy policies and is periodically reviewed to ensure that the po licies have been followed. Short Problems SP 3-1 ANS. The answers will probably begin with cost/benefit. Additional answers will depend on each student’s ability to think beyond the obvious. • Cost/benefit: A small business may not generate enough sales/ca sh to support even a low -end system. • Technical capabilities: A sole proprietor without computer skills may spend time muddling through his/her system at the expense of the core business. • Customer perception: We knew a clothing store that catered to elderly people that preferred doing business the old way, including hand -written receipts. The invoicing function was kept manual, although the rest of the accounting function was automated. • Low-volume, volatile transactions : In some low -volume businesses, where each transaction needs to be handled differently, software solutions may be too complex to benefit the organization. 6 Solutions for Chapter 3 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password -protected website or school-approved learning management system for classroom use. SP 3-2 ANS. Most business es have altered business activities as communication technology has evolved. In the past, meetings to bring togeth er managers of branches spread all over the country had to be held face -to-face. With the widespread use of the telephone, these meetings began to take place via conference calls. Similarly, e - mail allowed immediate communication with one person or a group of people. Currently, the widespread use of webcams and programs such as Skype has allowed meetings to be held via video -conferencing. It is very important for a company with branches in different parts of the country to remain in contact and on the same page as to how the business should be run. Phone, e -mail, and the Internet have allowed for reduced travel expenses because groups no longer have to meet face -to-face. Also, these meetings can take place much more frequently and with greater ease. The disa dvantage of not holding face -to-face meetings is removing the ability to personally interact with co -workers and read their emotions, which can be done when speaking in person. Where the phone and e - mail removed important reactions (such as facial expressi ons, inflection, etc.), video -conferencing reintroduces these important factors into meetings. It is important to reach a point where everyone agrees, or at least understands, the message intended to be communicated. SP 3-3 ANS. Students will likely provi de a variety of examples. One example of a business that has expanded and improved through the development of its value chain is a music provider such as iTunes. In the past, music stores have had to keep a huge inventory of CDs to meet the vast range of m usical tastes of their customers. Now, much music is purchased and downloaded over the Internet. iTunes does not have to keep large quantities of CDs in stock ; instead, it allows customers to browse an online library of music and purchase individual songs or entire CDs over the Internet. This business eliminates the inconvenience of visiting a music store and taking the time to find the music of interest. Also, an entire CD does not have to be purchased to gain access to the few songs that you really love. E- business has allowed iTunes to provide music without the large quantities of inventory while providing customers with even more complete and specific music purchasing options. SP 3-4 ANS. Students will likely provide a variety of situations. In a busines s such as an antique furniture store, periodic processing is sufficient to support the business process. When a customer buys a piece of furniture, it is unnecessary to immediately update all of the financial data to reflect this sale. Since the inventory is “one -of-a-kind” and transaction volume is relatively lower than some other businesses, the managers do not need constantly updated inventory information to make purchasing decisions. It is sufficient to process all of the sales as a batch on a daily/wee kly basis. On the other hand, in a business such as a large grocery store, it is necessary for the store to operate on an immediate processing system. Having scanners and bar codes on all of the items allows the master data to remain up -to-date and easily accessible at all times. This is important in this business environment because so many transactions occur throughout the day, and managers need to be aware of inventory levels to know Accounting Information Systems, 11e 7 © 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, e xcept for use as permitted in a license distributed with a certain pro duct or service or otherwise on a password -protected website or school -approved learning management system for classroom use. what needs to be restocked, reordered, or placed on sale. With so many competitors, usually within close vicinity, it is important not to gain a reputation for being out of stock of important items because customers may begin to take their business elsewhere for these everyday necessities. SP 3 -5 ANS. The students’ solutions will vary. One example business would be an antique store. The local -only model generally limits the customers to “driving distance”. That customer limitation also limits the size of the facility and inventory levels. When moving to an Internet presence, e ssentially the world becomes potential customers, allowing higher sales volume and inventory levels. The problem is that the technology also enables the customers to compare prices and products among vendors. Because of this fact, higher sales volume, may not result in higher profits —it may actually reduce profits. It is important for students to know that while there are opportunities, there are also risks with new technologies (and business mo dels.) Problems Note: Because several problems in Chapter 3 ar e open -ended, solutions are not provided to some, and for others the answers are general guidelines rather than specific solutions. P 3-1 ANS. Frequently, Web sites have information on how they process orders, including security and privacy information. Th e information is frequently available through a section entitled “About the company,” “Privacy,” or some other name. Specifically, you might expect student solutions to include information on SSL transactions and other methods of handling transactions. Pay ment methods may include options such as credit cards, PayPal, bank drafts, wire transfers, or mailing in a check or money order. Issues may be raised with each of these methods of payment. You may want to have the students search the web for measures of u sability and evaluate the web site selected for the problem. P 3-2 ANS. One primary concern of cloud computing is the risks that are introduced, which need to be managed. A primary risk is a company gives up control of the technology. That risk manifests in lack of transparency, vendor “lock -in”, potential risk of cyberattacks, and ceding performance issues to an outside organization. Opportunities include scalability, reduced effort in technology management, and cost savings. (Source: Thought Leadership i n ERM: Enterprise Risk Management for Cloud Computing, Crowe Horwath LLP. http://www.coso.org/documents/Cloud%20Computing%20Thought%20Paper.pdf )