Question

DQ 1.1) The value of information is the difference between the benefits realized from using that information and the costs of producing it. Would you, or any organization, ever produce information if its expected costs exceeded its benefits? If so, provide some examples. If not, why not?

DQ 1.2) Can the characteristics of useful information listed in Table 1-1 be met simultaneously? Or does achieving one mean sacrificing another?

P1.2) Adapted from the CMA Examination
a. Identify and discuss the basic factors of communication that must be considered in the presentation of the annual report.
b. Discuss the communication problems a corporation faces in preparing the annual report that result from the diversity of the users being addressed.
c. Select two types of information found in an annual report, other than the financial statements and accompanying footnotes, and describe how they are helpful to the users of annual reports.
d. Discuss at least two advantages and two disadvantages of stating well-defined corporate strategies in the annual report.

P1.6) The use of IT at Tesco
a. What kind of information do you think Tesco gathers?   
b. How do you think Tesco has motivated over 12 million customers to sign up for its Club card program?   
c. What can Tesco accomplish with the Club card data it collects? Think in term of strategy and competitive advantage.
d. What are some of the disadvantages to the Club card program?
e. Do an Internet search to find out how Tesco is doing in comparison to Wal-Mart and other grocers and retailers. Write a few paragraphs explaining your findings.

DQ2.5) Some individuals argue that accountants should focus on producing financial statements and leave the design and production of managerial reports to information systems specialists. What are the advantages and disadvantages of following this advice? To what extent should accountants be involved in producing reports that include more than just financial measures of performance? Why?
P2.1) The chart of accounts must be tailored to an organization’s specific needs. Discuss how the chart of accounts for the following organizations would differ from the one presented for S&S in Table 2-2.

DQ3.3) Compare the guidelines for preparing flowcharts and DFDs. What general design principles and limitations are common to both documentation techniques?

DQ7.3) One function of the AIS is to provide adequate controls to ensure the safety of organizational assets, including data. However, many people view control procedures as “red tape.” They also believe that, instead of producing tangible benefits, business controls create resentment and loss of company morale. Discuss this position.

DQ7.6) Some restaurants use customer checks with prenumbered sequence codes. Each food server uses these checks to write up customer orders. Food servers are told not to destroy any customer checks; if a mistake is made, they are to void that check and write a new one. All voided checks are to be turned in to the manager daily. How does this policy help the restaurant control cash receipts?

P7.1) You are an audit supervisor assigned to a new client, Go-Go Corporation, which is listed on the New York Stock Exchange. You visited Go-Go’s corporate headquarters to become acquainted with key personnel and to conduct a preliminary review of the company’s accounting policies, controls, and systems. During this visit, the following events occurred:
a. You met with Go-Go’s audit committee, which consists of the corporate controller, treasurer, financial vice president, and budget director.
b. You recognized the treasurer as a former aide to Ernie Eggers, who was convicted of fraud several years ago.
c. Management explained its plans to change accounting methods for depreciation from the accelerated to the straight-line method. Management implied that if your firm does not concur with this change, Go-Go will employ other auditors.
d. You learned that the financial vice president manages a staff of five internal auditors.
e. You noted that all management authority seems to reside with three brothers, who serve as chief executive officer, president, and financial vice president.
f. You were told that the performance of division and department managers is evaluated on a subjective basis, because Go-Go’s management believes that formal performance evaluation procedures are counterproductive.
g. You learned that the company has reported increases in earnings per share for each of the past 25 quarters; however, earnings during the current quarter have leveled off and may decline.
h. You reviewed the company’s policy and procedures manual, which listed policies for dealing with customers, vendors, and employees.
i. Your preliminary assessment is that the accounting systems are well designed and that they employ effective internal control procedures.
j. Some employees complained that some managers occasionally contradict the instructions of other managers regarding proper data security procedures.
k. After a careful review of the budget for data security enhancement projects, you feel the budget appears to be adequate.
l. The enhanced network firewall project appeared to be on a very aggressive implementation schedule. The IT manager mentioned that even if he put all of his personnel on the project for the next five weeks, he still would not complete the project in time. The manager has mentioned this to company management, which seems unwilling to modify the schedule.
m. Several new employees have had trouble completing some of their duties, and they do not appear to know who to ask for help.
n. Go-Go’s strategy is to achieve consistent growth for its shareholders. However, its policy is not to invest in any project unless it’s payback period is no more than 48 months and yields an internal rate of return that exceeds its cost of capital by 3%.
o. You observe that company purchasing agents wear clothing and exhibit other paraphernalia from major vendors. The purchasing department manager proudly displays a picture of himself holding a big fish on the deck of a luxury fishing boat that has the logo of a major Go-Go vendor painted on its wheelhouse.
The information you have obtained suggests potential problems relating to Go-Go’s internal environment. Identify the problems, and explain them in relation to the internal environment concepts discussed in this chapter.

P7.2) Explain how the principle of separation of duties is violated in each of the following situations. Also, suggest one or more procedures to reduce the risk and exposure highlighted in each example.
a. A payroll clerk recorded a 40-hour workweek for an employee who had quit the previous week. He then prepared a paycheck for this employee, forged her signature, and cashed the check.
b. While opening the mail, a cashier set aside, and subsequently cashed, two checks payable to the company on account.
c. A cashier prepared a fictitious invoice from a company using his brother-in-law’s name. He wrote a check in payment of the invoice, which the brother-in-law later cashed.
d. An employee of the finishing department walked off with several parts from the storeroom and recorded the items in the inventory ledger as having been issued to the assembly department.
e. A cashier cashed a check from a customer in payment of an account receivable, pocketed the cash, and concealed the theft by properly posting the receipt to the customer’s account in the accounts receivable ledger.
f. Several customers returned clothing purchases. Instead of putting the clothes into a return bin to be put back on the rack, a clerk put the clothing in a separate bin under some cleaning rags. After her shift, she transferred the clothes to a gym bag and took them home.
g. A receiving clerk noticed that four cases of MP3 players were included in a shipment when only three were ordered. The clerk put the extra case aside and took it home after his shift ended.
h. An insurance claims adjuster had check signing authority of up to $6,000. The adjuster created three businesses that billed the insurance company for work not performed on valid claims. The adjuster wrote and signed checks to pay for the invoices, none of which exceeded $6,000.
i. An accounts payable clerk recorded invoices received from a company that he and his wife owned and authorized their payment.
j. A cashier created false purchase return vouchers to hide his theft of several thousand dollars from his cash register.
k. A purchasing agent received a 10% kickback of the invoice amount for all purchases made from a specific vendor.

P7.11) Spring Water Spa Company is a 15-store chain in the Midwest that sells hot tubs, supplies, and accessories. Each store has a full-time, salaried manager and an assistant manager. The sales personnel are paid an hourly wage and a commission based on sales volume. The company uses electronic cash registers to record each transaction. The salesperson enters his or her employee number at the beginning of his/her shift. For each sale, the salesperson rings up the order by scanning the item’s bar code, which then displays the item’s description, unit price, and quantity (each item must be scanned). The cash register automatically assigns a consecutive number to each transaction. The cash register prints a sales receipt that shows the total, any discounts, the sales tax, and the grand total. The salesperson collects payment from the customer, gives the receipt to the customer, and either directs the customer to the warehouse to obtain the items purchased or makes arrangements with the shipping department for delivery. The salesperson is responsible for using the system to determine whether credit card sales are approved and for approving both credit sales and sales paid by check. Sales returns are handled in exactly the reverse manner, with the salesperson issuing a return slip when necessary. At the end of each day, the cash registers print a sequentially ordered list of sales receipts and provide totals for cash, credit card, and check sales, as well as cash and credit card returns. The assistant manager reconciles these totals to the cash register tapes, cash in the cash register, the total of the consecutively numbered sales invoices, and the return slips. The assistant manager prepares a daily reconciled report for the store manager’s review. Cash sales, check sales, and credit card sales are reviewed by the manager, who prepares the daily bank deposit. The manager physically makes the deposit at the bank and files the validated deposit slip. At the end of the month, the manager performs the bank reconciliation. The cash register tapes, sales invoices, return slips, and reconciled report are mailed daily to corporate headquarters to be processed with files from all the other stores. Corporate headquarters returns a weekly Sales and Commission Activity Report to each store manager for review. Please respond to the following questions about Spring Water Spa Company’s operations:
a. The fourth component of the COSO ERM framework is risk assessment. What risk(s) does Spring Water face?
b. Control strengths in
c. Type of
d. Problems avoided/Risks mitigated by
e. How might Spring Water improve its system of controls?

P8.8) The chapter briefly discussed the following three common attacks against applications
a. Buffer overflows
b. SQL injection
c. Cross-site scripting
Required
Research each of these three attacks and write a report that explains in detail how each attack actually works and that describes suggested controls for reducing the risks that these attacks will be successful.

DQ9.4) What privacy concerns might arise from the use of biometric authentication techniques? What about the embedding of RFID tags in products such as clothing? What other technologies might create privacy concerns?

DQ10.6) Why do you think that surveys continue to find that a sizable percentage of organizations either do not have formal disaster recovery and business continuity plans or have not tested and revised those plans for more than a year?

DQ11.5) Lou Goble, an internal auditor for a large manufacturing enterprise, received an anonymous note from an assembly-line operator who has worked at the company’s West Coast factory for the past 15 years. The note indicated that there are some fictitious employees on the payroll as well as some employees who have left the company. He offers no proof or names. What computer-assisted audit technique could Lou use to help him substantiate or refute the employee’s claim?   

P11.1) You are the director of internal auditing at a university. Recently, you met with Issa Arnita, the manager of administrative data processing, and expressed the desire to establish a more effective interface between the two departments. Issa wants your help with a new computerized accounts payable system currently in development. He recommends that your department assume line responsibility for auditing suppliers’ invoices prior to payment. He also wants internal auditing to make suggestions during system development, assist in its installation, and approve the completed system after making a final review. Would you accept or reject each of the following? Why?
a. The recommendation that your department be responsible for the pre-audit of supplier's invoices.
b. The request that you make suggestions during system development.
c. The request that you assist in the installation of the system and approve the system after making a final review.

P11.2) As an internal auditor for the Quick Manufacturing Company, you are participating in the audit of the company’s AIS. You have been reviewing the internal controls of the computer system that processes most of its accounting applications. You have studied the company’s extensive systems documentation. You have interviewed the information system manager, operations supervisor, and other employees to complete your standardized computer internal control questionnaire. You report to your supervisor that the company has designed a successful set of comprehensive internal controls into its computer systems. He thanks you for your efforts and asks for a summary report of your findings for inclusion in a final overall report on accounting internal controls. Have you forgotten an important audit step? Explain. List five examples of specific audit procedures that you might recommend before reaching a conclusion.

P11.4) You are involved in the audit of accounts receivable, which represent a significant portion of the assets of a large retail corporation. Your audit plan requires the use of the computer, but you encounter the following reactions: For each situation, state how the auditor should proceed with the accounts receivable audit.
a. The computer operations manager says the company’s computer is running at full capacity for the foreseeable future and the auditor will not be able to use the system for audit tests.
b. The computer scheduling manager suggests that your computer program be stored in the computer program library so that it can be run when computer time becomes available.
c. You are refused admission to the computer room.
d. The systems manager tells you that it will take too much time to adapt the auditor’s computer audit program to the computer’s operating system and that company programmers will write the programs needed for the audit.
e. Parktown Medical Center, Inc. is a small health care provider owned by a publicly held corporation. It employs seven salaried physicians, ten nurses, three support staff, and three clerical workers. The clerical workers perform such tasks as reception, correspondence, cash receipts, billing, and appointment scheduling. All are adequately bonded. Most patients pay for services rendered by cash or check on the day of their visit. Sometimes, however, the physician who is to perform the respective services approves credit based on an interview. When credit is approved, the physician files a memo with one of the clerks to set up the receivable using data the physician generates.
f. The servicing physician prepares a charge slip that is given to one of the clerks for pricing and preparation of the patient’s bill. At the end of the day, one of the clerks uses the bills to prepare a revenue summary and, in cases of credit sales, to update the accounts receivable subsidiary ledger.
g. The front office clerks receive cash and checks directly from patients and give each patient a renumbered receipt. The clerks take turns opening the mail. The clerk who opens that day’s mail immediately stamps all checks “for deposit only.” Each day, just before lunch, one of the clerks prepares a list of all cash and checks to be deposited in Park town’s bank account. The office is closed from 12 noon until 2:00 p.m. for lunch. During that time, the office manager takes the daily deposit to the bank. During the lunch hour, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts. The clerks take turns preparing and mailing monthly statements to patients with unpaid balances. One of the clerks writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates that belief to the office manager. The office manager then issues a credit memo to write off the account, which the clerk processes. The office manager supervises the clerks, issues write-off memos, schedules appointments for the doctors, makes bank deposits, reconciles bank statements, and performs general correspondence duties. Additional services are performed monthly by a local accountant who posts summaries prepared by the clerks to the general ledger, prepares income statements, and files the appropriate payroll forms and tax returns.
h. Identify at least three control weaknesses at Park town. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them.

P12.8) Parktown Medical Center, Inc. is a small health care provider owned by a publicly held corporation. It employs seven salaried physicians, ten nurses, three support staff, and three clerical workers. The clerical workers perform such tasks as reception, correspondence, cash receipts, billing, and appointment scheduling. All are adequately bonded. Most patients pay for services rendered by cash or check on the day of their visit. Sometimes, however, the physician who is to perform the respective services approves credit based on an interview. When credit is approved, the physician files a memo with one of the clerks to set up the receivable using data the physician generates.
The servicing physician prepares a charge slip that is given to one of the clerks for pricing and preparation of the patient’s bill. At the end of the day, one of the clerks uses the bills to prepare a revenue summary and, in cases of credit sales, to update the accounts receivable subsidiary ledger.
The front office clerks receive cash and checks directly from patients and give each patient a renumbered receipt. The clerks take turns opening the mail. The clerk who opens that day’s mail immediately stamps all checks “for deposit only.” Each day, just before lunch, one of the clerks prepares a list of all cash and checks to be deposited in Park town’s bank account. The office is closed from 12 noon until 2:00 p.m. for lunch. During that time, the office manager takes the daily deposit to the bank. During the lunch hour, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts. The clerks take turns preparing and mailing monthly statements to patients with unpaid balances. One of the clerks writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates that belief to the office manager. The office manager then issues a credit memo to write off the account, which the clerk processes. The office manager supervises the clerks, issues write-off memos, schedules appointments for the doctors, makes bank deposits, reconciles bank statements, and performs general correspondence duties. Additional services are performed monthly by a local accountant who posts summaries prepared by the clerks to the general ledger, prepares income statements, and files the appropriate payroll forms and tax returns.
Identify at least three control weaknesses at Park town. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them.
DQ13.2) Companies such as Wal-Mart have moved beyond JIT to VMI systems. Discuss the potential advantages and disadvantages of this arrangement. What special controls, if any, should be developed to monitor VMI systems?

DQ13.5) Should every company switch from the traditional 3-way matching process (purchase orders, receiving reports, and supplier invoices) to the 2-way match (purchase orders and receiving reports) used in Evaluate Receipt Settlement (ERS)? Why (not)?

P13.1) Which internal control procedure would be most cost-effective in dealing with the following expenditures cycle threats?
a. A purchasing agent orders materials from a supplier that he partially owns.
b. Receiving-dock personnel steal inventory and then claim the inventory was sent to the warehouse.
c. An unordered supply of laser printer paper delivered to the office is accepted and paid for because the “price is right.” After jamming all of the laser printers, however, it becomes obvious that the “bargain” paper is of inferior quality.
d. The company fails to take advantage of a 1% discount for promptly paying a vendor invoice.
e. A company is late in paying a particular invoice. Consequently, a second invoice is sent, which crosses the first invoice’s payment in the mail. The second invoice is submitted for processing and also paid.
f. Inventory records show that an adequate supply of copy paper should be in stock, but none is available on the supply shelf.
g. The inventory records are incorrectly updated when a receiving-dock employee enters the wrong product number at the terminal.
h. A clerical employee obtains a blank check and writes a large amount payable to a fictitious company. The employee then cashes the check.
i. A fictitious invoice is received and a check is issued to pay for goods that were never ordered or delivered.
j. The petty cash custodian confesses to having “borrowed” $12,000 over the last five years.
k. A purchasing agent adds a new record to the supplier master file. The company does not exist. Subsequently, the purchasing agent submits invoices from the fake company for various cleaning services. The invoices are paid.
l. A clerk affixes a price tag intended for a low-end flat panel TV to a top-of-the line model. The clerk’s friend then purchases that item, which the clerk scans at the checkout counter.


P15.2) What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts?
a. An inadvertent data entry error caused an employee’s wage rate to be overstated in the payroll master file.
b. A fictitious employee payroll record was added to the payroll master file.
c. During data entry, the hours worked on an employee’s time card for one day were accidentally entered as 80 hours, instead of 8 hours.
d. A computer operator used an online terminal to increase her own salary.
e. A factory supervisor failed to notify the HRM department that an employee had been fired. Consequently, paychecks continued to be issued for that employee. The supervisor pocketed and cashed those paychecks.
f. A factory employee punched a friend’s time card in at 1:00 P.M. and out at 5:00 P.M. while the friend played golf that afternoon.
g. A programmer obtained the payroll master file and increased his salary.
h. Some time cards were lost during payroll preparation; consequently, when paychecks were distributed, several employees complained about not being paid.
i. A large portion of the payroll master file was destroyed when the disk pack containing the file was used as a scratch file for another application.
j. The organization was fined $5000 for making a late quarterly payroll tax payment to the IRS.

P15.5) Arlington Industries manufactures and sells engine parts for large industrial equipment. The company employs over 1,000 workers for three shifts, and most employees work overtime when necessary. Figure 15-10 depicts the procedures followed to process payroll. Additional information about payroll procedures follows:
• The HRM department determines the wage rates of all employees. The process begins when a form authorizing the addition of a new employee to the payroll master file is sent to the payroll coordinator for review and approval. Once the information about the new employee is entered in the system, the computer automatically calculates the overtime and shift differential rates for that employee.
• A local accounting firm provides Arlington with monthly payroll tax updates, which are used to modify the tax rates.
• Employee’s record time worked on time cards. Every Monday morning the previous weeks’ time cards are collected from a bin next to the time clock, and new time cards are left for employees to use. The payroll department manager reviews the time cards to ensure that hours are correctly totaled; the system automatically determines if overtime has been worked or a shift differential is required.
• The payroll department manager performs all the other activities depicted in Figure 15-10
• The system automatically assigns a sequential number to each payroll check. The checks are stored in a box next to the printer for easy access. After the checks are printed, the payroll department manager uses an automatic check signing machine to sign the checks. The signature plate is kept locked in a safe. After the checks have been signed, the payroll manager distributes the paychecks to all first-shift employees. Paychecks for the other two shifts are given to the shift supervisor for distribution.
• The payroll master file is backed up weekly, after payroll processing is finished.

a. Identify and describe at least three weaknesses in Arlington Industries’ payroll process.
b. Identify and describe at least two different areas in Arlington’s payroll processing system where controls are satisfactory.   

P15.9) What is the purpose of each of the following control procedures (i.e., what threats is it designed to mitigate)?
a. Compare a listing of current and former employees to the payroll register.
b. Reconciliation of labor costs (based on job-time ticket data) with payroll (based on time card data).
c. Direct deposit of paychecks.
d. Validity checks on Social Security numbers of all new employees added to the payroll master file.
e. Cross-footing the payroll registers.
f. Limit checks on hours worked for each time card.
g. Use of a fingerprint scanner in order for employees to record the time they started and the time they quit working each day.
h. Encryption of payroll data both when it is electronically sent to a payroll service bureau and while at rest in the HR/payroll database.
i. Establishing a separate payroll checking account and funding it as an imprest account.
j. Comparison of hash totals of employee numbers created prior to transmitting time-worked data to payroll provider with hash totals of employee numbers created by payroll provider when preparing paychecks.
k. Periodic reports of all changes to payroll database sent to each department manager.
l. Providing employees with earnings statements every pay period.

P16.3) Explain the components of an audit trail for verifying changes to accounts payable. Your answer should specify how those components can be used to verify the accuracy, completeness, and validity of all purchases, purchase returns, purchase discounts, debit memos, and cash disbursements.

P20.1) How do you get a grizzled veteran police officer who is used to filling out paper forms to use a computer to process his arrests and casework—especially when he has little or no experience using a computer? That was the problem facing the Chicago Police Department when it decided to implement a relational database system. The system is capable of churning through massive amounts of data to give officers the information they need to fight crime more effectively.   Initially, the department rolled out the case component of the CLEAR (Citizen Law Enforcement Analysis and Reporting) system that provided criminal history and arrest records. The officers hated it, complaining that the system was not user-friendly, that approval from supervisors was complex and involved multiple screens, and that they did not feel properly trained on the system. After listening to the officers’ complaints for a year, the department clearly had to do something. (Adapted from Todd Datz, “No Small Change,” CIO (February 15, 2004): 66–72)
a. Identify as many system analysis and design problems as you can.
b. What could the department have done differently to prevent the officers’ complaints?
c. What principles of system analysis and design were violated in this case?

P20.3) 3 Wright Company’s information system was developed in stages over the past five years. During the design process, department heads specified the information and reports they needed. By the time development began, new department heads were in place, and they requested additional reports. Reports were discontinued only when requested by a department head. Few reports were discontinued, and a large number are generated each period. Management, concerned about the number of reports produced, asked internal auditing to evaluate system effectiveness. They determined that more information was generated than could be used effectively and noted the following reactions:
• Many departments did not act on reports during peak activity periods. They let them accumulate in the hope of catching up later.
• Some had so many reports they did not act at all or misused the information.
• Frequently, no action was taken until another manager needed a decision made. Department heads did not develop a priority system for acting on the information.
• Department heads often developed information from alternative, independent sources. This was easier than searching the reports for the needed data.
a. Explain whether each reaction is a functional or dysfunctional behavioral response.
b. Recommend procedures to eliminate dysfunctional behavior and prevent its recurrence.

P20.10) Businesses often modify or replace their financial information system to keep pace with their growth and take advantage of improved IT. This requires a substantial time and resource commitment. When an organization changes its AIS, a systems analysis takes place. Adapted from the CMA exam   
a. Explain the purpose and reasons for surveying an organization’s existing system.
b. Explain the activities commonly performed during systems analysis. Initial Investigation.
c. Systems analysis is often performed by a project team composed of a systems analyst, a management accountant, and other knowledgeable and helpful people. What is the management accountant’s role in systems analysis?

DQ21.1) What is the accountant’s role in the computer acquisition process? Should the accountant play an active role, or should all the work be left to computer experts? In what aspects of computer acquisition might an accountant provide a useful contribution?

DQ21.5) Clint Grace has been business over 30 years and has definite ideas about how his ten retail stores should be run. He is financially conservative and is reluctant to make expenditures that do not have a clear financial payoff. Store profitability has declined sharply and customer dissatisfaction is high. Store managers never know how much inventory is on hand and when purchases are needed until a shelf is empty. Clint asks you to determine why profitability has declined and to recommend a solution. You determine that the current AIS are inefficient and unreliable and that company processes and procedures are out of date. You believe the solution is to redesign the systems and business processes using BPM. What are some challenges you might face in redesigning the system? How will you present your recommendations Clint?

P21.2) A federal agency signed a 15-month contract for $445,158 for a human resources/payroll system. After 28 months and no usable software, the agency canceled the contract and withheld payment for poor performance. A negotiated settlement price of $970,000 was agreed on. The project experienced the following problems:
• The contractor did not understand what software was desired. The RFP did not have fully developed user requirements or system specifications, and user requirements were never adequately defined and frozen. Changes delayed completion schedules and caused disagreements about whether new requirements were included in the original scope of work.
• The contract did not specify systems requirements or performance criteria, and the terminology was vague. The contract was amended 13 times to add or delete requirements and to reimburse the contractor for the extra costs resulting from agency caused delays. The amendments increased the cost of the contract to $1,037,448.   
• The contractor complained of inexcusable agency delays, such as taking too much time to review items submitted for approval. The agency blamed the delays on the poor quality of the documentation under review.
• The agency did not require each separate development phase to be approved before work continued. When the agency rejected the general system design, the contractor had to scrap work already completed.   
a. What caused the problems? How could the agency have better managed the systems development project? What could the contractor have done differently?
b. Can we conclude from this case that organizations should not have custom software written for them? Explain your answer.

P21.6) A large organization had 18 months to replace its old customer information system with a new one that could differentiate among customer levels and provide appropriate products and services on demand. The new system, which cost $1 million and was installed by the IS staff on time, did not work properly. Complex transactions were error-prone, some transactions were canceled and others were put on hold, and the system could not differentiate among customers. The system was finally shut down, and transactions were processed manually. New IS management was hired to build a new system and mend the strained relationship between operations and IS. So what went wrong? IS couldn’t—or wouldn’t—say no to all the requests for systems enhancements. Eager to please top management, IS management ignored the facts and assured them they could build a scalable system that was on time and on budget. Another big mistake was a strict project schedule with little flexibility to deal with problems and unforeseen challenges. Developers never spoke up about any glitches they encountered along the way. More than a dozen people (including the CIO) lost their jobs because of their roles in this disaster.

a. What could IS management have done differently to make this project successful?
b. What in-house development issues are demonstrated in this case?
c. How could the in-house issues have been addressed to prevent the system’s failure?

P21.7) Meredith Corporation publishes books and magazines, owns and operates television stations, and has a real estate marketing and franchising service. Meredith has 11 different systems that do not communicate with each other. Management wants an executive information system that provides them with the correct and timely information they need to make good business decisions. Meredith has decided to use prototyping to develop the system.
a. Identify three questions you would ask Meredith personnel to determine systems requirements. What information are you attempting to elicit from each question?
b. Explain how prototyping works. What would the system developer do during the iterative process step? Why would you want the least iteration possible?
c. Would you want the prototype to be operational or nonoperational? Why? If it were an operational prototype, what would have to happen? If it were a nonoperational prototype, how would the prototype is used?
d. Suppose the company decides the prototype system is not practical, abandons it, and takes some other approach to solving its information problem. Does that mean prototyping is not a valid systems development approach? Explain your answer.

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Answer DQ 1.1:
An organization would produce information when costs exceed the benefits in some cases. This is because it is not possible to estimate all the costs and benefits accurately since they are subjective in nature too. Moreover, information that may seem irrelevant today may be relevant in future. As an example, an organization conducts feasibility analysis before making expansion decisions. Some of the sites may not be fit and this information can be seen as costly. However, it is beneficial in the long run since the company is saved from selecting the wrong site. These long term benefits are not easy to quantify and as such, organizations tend to produce such apparently costly information. There can be mandatory requirements to produce that information which may make it necessary to produce it. ...

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