Question

QUESTION

Most grocery stores use bar code scanning technologies that interface with cash registers used to process customer purchases. Cashiers use the scanners to read bar code labels attached to each product, which the system then uses to obtain unit prices, calculate transaction totals, including sales taxes, and update perpetual inventory databases. Similarly, cashiers scan bar codes on coupon or member discount cards presented by the customer to process discounts. Along with the scanning technologies, groceries use point-of-sale technologies that allow customers to swipe debit and credit cards for payment, while still maintaining the ability for customers to pay with cash.

Required:

A) Which financial statement accounts are impacted by the use of these technologies in a typical grocery store?

B) Identify risks inherent to this business process in a grocery store that might affect the financial statement accounts identified in part a. For each risk, describe how these technologies help reduce the inherent risk.

C) How does the use of these technologies create new risks for a grocery store?

D) How might an auditor use technology to test the operating effectiveness of a bar code scanner based check-out system?

thank you for your help~

Answer 1

A) Which financial statement accounts are impacted by the use of these technologies in a typical grocery store?

Ans - The following accounts are affected

Sales revenue account,

Sales tax (if any)

Recievables Account,

Cash account,

Discount on sales Account,

Sales Return Account,

Inventory(Stock) Account,

COGS, etc.

B) Identify risks inherent to this business process in a grocery store that might affect the financial statement accounts identified in part a. For each risk, describe how these technologies help reduce the inherent risk.

Ans - 1. As there are lot of items purchased generally, there can be totalling error. This error is automatically eliminated as the system does the totalling work.

2. Some items may get skipped from the bill, while purchased by the customer, this risk is reduced as each item is scanned by the barcode system.

3. Sometimes, Cashier can apply wrong price /wrong discount on any product, this is also eliminated as the system generates the price through the barcode

4. Also, there is a risk of out of stock for any item in grocery stores which is carefully handlled by this system as the inventory account is directly affected by sales billing. So the Shopkeeper can track stock of all items anytime & aviod stockouts.

C) How does the use of these technologies create new risks for a grocery store?

Ans- 1. Arithmetical error by the system.

2. The price of product is changed or discount is changed, but changes are not made in the system.

3. Wrong barcode sticker is fixed on the product or the master file contains wrong data.

4. Inventory of wrong product is affected, & hence inventory records are improper.

5. Techinal errors & system failures.

D) How might an auditor use technology to test the operating effectiveness of a bar code scanner based check-out system?

Ans- Using different audit softwares, the auditor can do the following things to check the barcode system:

1. Inorder to check whether the price list is correct, auditor can check the list & find out if there is any unusual pricing, negative pricing, etc.

2. He can perform walk through procedure, i.e Select some items and get them scanned through barcode & billed. Now he can verify them with the data available with him & ensure the operating effectiveness.

3. Auditor can check few items of inventory by physical count & verify with the system whether correct quantity is reflected.

4. He can test check some bills for arithemetical errors. Also, check whether daily totals are correctly posted to accounts.

5. Auditor can also verify the inventory records to check for slow moving items.