IPC – Final Exam SM1 2021
Question 1 [14 Marks]
Branter is a brick-and-mortar department store (i.e., no online sales). Branter has provided you the
following extract of their Entity-Relationship-Diagram (ERD).
IPC – Final Exam SM1 2021
Question 1.1 [7]
a) Explain why the staff entity would be related to itself, and what would be the missing verbs (??)
that describe the interaction (relationship)? (2 marks)
Supervisors are also staff members, hence the relationship to itself. (1)
Supervises (0.5), and supervised by (0.5)
b) Explain the role of the Sales Price entity, i.e., what would it be used for? (2 marks)
This would be to set the price for each item, at each point in time. (1)
This will enable future prices to be set (e.g., to put an item on sale, or to discount for clearance)
with changes made automatically. (1)
(also acceptable for looking up historical prices to calculate revenue)
c) Propose another entity from the revenue cycle that could also have been included in the ERD?
What would be the role of this entity (the kind of information stored)? What relationships would
this entity have with the other entities already included in the ERD? (3 marks)
Payment (1)
This would link to Tax invoice based on the fact there is a payment ID (1)
This could include the amount paid, how it was paid (cash, card etc.) (1)
Question 1.2 [7 Marks]
a) What entity or entities and attributes would be needed to calculate the cost of Branter’s
Inventory (i.e., avg. cost price)? Assume Branter uses the average cost method. (3 marks)
Goods movement (1) - Purchase quantity (0.5), Purchase Price (maybe total) for inwards
movement (0.5)
And Invoice Item quantity for outwards movement (1)
b) How would the GST Amount on the Tax invoice be calculated? (2 marks)
The sum of 1/11th the sales price of all items sold (1) which are not GST exempt (1)
c) Branter’s sale staff are able to give discounts to customers in certain circumstances, e.g., price
match a competitor. How would you determine how much discount has been given for an
individual order? (2 marks)
Compare the sales price on the invoice item entity (0.5), with the sales price in the sales price
entity (0.5) based on the tax invoice date (1).
IPC – Final Exam SM1 2021
Question 2 [17 Marks]
Question 2.1 [3 Marks]
A supermarket owner decided to turn off the “beep” that sounds after scanning each item at the
cash register so that customers can better appreciate the music played in the store. What is the
potential impact of this decision?
The “beep” is a detective control (1) as it enables cashiers and customers to realize if an item is
accidentally scanned more than once. It helps with validity of sales data (1) as scanning an item
more than once would render all but the first scan invalid (sale does not really exist) (1). (Could
argue completeness if reasoned that beep alerts missing an item)
Question 2.2 [4 Marks]
The CEO of a manufacturing company detected an error in the bill of materials (incorrect number of
one raw material) for one of its products. The CEO is concerned about personal liability since the
company just issued the financial reports which she signed. Comment on the CEO’s concerns with
respect to management assertions and faithful representation of the financial statements.
Neither management assertions (1), nor faithful representation (1) are at risk.
The BOM is used by the MRP to generate a PR and ultimately a P.O. (1).
While an incorrect BOM leads to a P.O. which is for the incorrect amount of raw materials, the
financial statements are nevertheless correct. It is purely an operational concern (1). (One can argue
that the PR is not accurate, but no effect on FS).
*NOTE: question tests if students watched Matt’s Conversion cycle video
Question 2.3 [5 Marks]
It can be argued that security cameras not only enable the identification of illegal activity but also
act as a deterrent. Explain how the use of security cameras in a warehouse of an online retailer helps
ensure that the Income Statement is faithfully represented. In your answer address both reasons for
using security cameras (i.e., identification and deterrence effect). In your response, link the reasons
for using security cameras to the appropriate ‘type’ of control and refer to information quality goals.
Security cameras can help detect and deter the theft of inventory by employees (1) (online retailer!).
Thus, they also act as a detective control by identifying which inventory items have been stolen (1).
As such, they enable proper write-off of stolen inventory to a loss account (1). Secondly, they act as
a preventive control (i.e., discouraging employee theft) (1) and ensure that goods are available for
sale, so that invalid sales are not recorded (1)
Question 2.4 [5 Marks]
Explain why a REA model would NOT be an adequate tool for evaluating whether a business process
achieves its operational and information quality goals (assume no other documentation is provided).
IPC – Final Exam SM1 2021
REA models are not specific with respect to the following: processing modes (immediate vs.
periodic), controls (present/missing), data storage types (electronic vs. paper) (2 – should mention
at least 2); moreover, REA does not reflect some databases that are used in practice (e.g., A/R,
payables) (1). As such, commenting on strengths and weaknesses is difficult (1); basing
recommendations solely on a REA model would thus not be appropriate (1).
IPC – Final Exam SM1 2021
Question 3 [16 Marks]
WTH is a chain of retail stores operating in a highly competitive environment where customers are
extremely sensitive to quality. The company pursues a cost-leadership strategy. Sales prices are set
at TOTAL cost plus 20% markup.
Until recently, WTH maintained a folder (i.e., paper-based data store) that contained all the details
of approved suppliers. For each product, WTH has two suppliers: one that is considered the “primary
supplier” and one that is consider the “alternative supplier”. Primary suppliers offer better quality
products than alternative suppliers, which is why all products received from alternative suppliers
first undergo a quality inspection routine prior to being placed on shelves in the retail stores, which
adds to the cost of the products. Prices do NOT differ between primary and alternative suppliers.
Purchasing staffing is encouraged to always select primary suppliers unless a primary supplier is
running low on some inventory items (this happens for about 30% of all orders). Prior to placing an
order, purchasing staff verifies that enough products are available at the primary supplier (WTH has
access to real-time inventory data of all suppliers).
Last month, WTH manually entered the information contained in the supplier folder (i.e., the paper-
based data store) into a computerized supplier database. During data entry, a mandatory field
required data-entry staff to classify each supplier as “primary supplier” or “alternative supplier”.
Unfortunately, some pairs of suppliers (e.g., the two suppliers for Product A) had the classification
switched. This has not yet been detected by anyone in the company.
Question 3.1 [5 Marks]
a) What (if any) is the random error in the process? Explain why. (1.5 marks)
Mismatch of data (or data entry error) (0.5) since it affected only some suppliers listed in the
database (1).
b) What (if any) is the systematic error in the process? Explain why. (1.5 marks)
Subsequent re-ordering (0.5) because it is based on the wrong classification (1).
c) Which process goal of which transaction cycle is directly affected by this error? (2 marks)
Goal: ordering right goods (i.e., from right supplier) (1) during expenditure cycle (1)
Question 3.2 [6 Marks]
a) Explain how this data problem would affect two other transaction cycles. (4 marks)
2 of the following (mark for identifying cycle only if explained):
Transaction Cycle #1: Sales cycle - affects pricing which is determined by cost +20% (2)
Transaction Cycle #2: Conversion cycle – affects time and cost of getting inventory ready for sale
(2)
IPC – Final Exam SM1 2021
Transaction Cycle #3: GLFR cycle – affects sales forecast as customers are price sensitive (2)
b) Which financial accounts, if any, would be over- or understated because of this error? Explain
with reference to the concept of faithful representation (2 marks)
No financial account misstatements (1). Buying from wrong supplier and incurring additional
costs would affect operations/profitability but not the faithful representation of the financial
statements (1)
Question 3.3 [5 Marks]
a) Assume that products delivered from alternative suppliers would NOT have to undergo quality
inspection. How would this affect the faithful representation of financial statements and the
company’s profitability? (3 marks)
Sales revenue overstated as sales are recorded for unsuitable products (1). Inventory overstated
for unsuitable products (1). Increase in profitability (at least short-term) due to cost-savings (no
inspection costs!) (1).
b) Assume three to five new ‘pairs’ of suppliers are added (for new products) each month.
Recommend a proper control to prevent supplier misclassification errors to occur in the future
(2 marks)
Manual control (1) – e.g., manager review (1) - since proper classification requires judgment
(0.5) and frequency is low (0.5). (can give 0.5 marks for mentioning ‘General Control’ if one of
the other points is missing)
IPC – Final Exam SM1 2021
Question 4 [14 Marks]
Question 4.1 – ERP System [4 Marks]
The ACID Properties are a set of properties that ensure data integrity when recording transactions in
databases. An ERP System (e.g., SAP) captures transactions across the enterprise.
Using an example from GBI/ERPSim, provide evidence that the property of Consistency is enforced
by the ERP system. In your answer indicate which information quality goals are enhance because of
this.
Consistency refers to the fact the data needs to be consistent from a business perspective.
By consistent, this means that data needs to conform with a pre-determined set of
constraints (e.g., the values need to be within range) (1)
For instance, in the PP module, you are only able to issue the raw materials to production based on
the amount of raw materials that you are recorded as received. If you try to send more raw
materials into production (i.e., more than what you have as recorded), this event will not go
through. (1)
OR ERPSim example: if you only have 200 bottles of Lemon Spritz left in your inventory, you can
only sell a total of 200 bottles of Lemon Spritz, and nothing more. (1)
This ensures validity, accuracy and completeness of the transaction (1) + (1 – for explanation)
Question 4.2 – RPA [10 Marks]
Fashioneo Pty Ltd is an international fashion-apparel conglomerate that operates across different
industries. It is looking into merging with Clothingly, a similar sized international fashion-apparel
business, for greater efficiency and market outreach. Currently, Fashioneo’s chart of accounts is
based on a divisional structure, with each division being a separate business line. Clothingly’s chart
of accounts also has a divisional structure; however, it is based on geographic regions.
As part of the merger, Fashioneo needs to merge the chart of accounts of the two companies, which
includes the process of re-coding the transactions in Clothingly to fit into Fashioneo’s chart of
accounts structure. Due to the differences in which the two companies categorise their divisions,
each account/transaction in Clothingly would need to be examined to determine which division it
would be assigned to in Fashioneo’s chart of accounts. Each company has approximately 1200-1500
accounts listed in their chart of accounts.
The CFO of Fashioneo wants to build and implement an RPA bot to merge the two charts of
accounts, to ensure that the process is more efficient and has less error. Given that there will be
future M&As, the CFO believes that investment in building this bot can be recouped through future
use. The CFO is asking you, the in-house RPA unit member at Fashioneo, for advice.
a) From a feasibility and complexity perspectives, do you think it is reasonable to implement RPA
to merge the two chart of accounts? Explain why or why not. (4 marks)
From a technical feasibility perspective – already have an in-house RPA expertise – so
Fashionista has the technical capability. (1)
Judgment involved – not straightforward merge of the two CoA – bot cannot make the judgment
(1)
IPC – Final Exam SM1 2021
Clothingly’s transaction will be reassigned into multiple divisions - to fit into Fashionista’s chart
of accounts (1)
Once the judgment has been made – the process could be highly repetitive – but it is not
possible with a single bot (1)
*NOTE: other arguments may be possible – mark accordingly (e.g., there may be arguments
around volume, standardisation, a single bot vs. multiple bots, etc.)
b) If the bot is implemented, it will improve efficiency and reduce errors. Explain the compliance
benefit that may result from this? (2 marks)
Audit trail (1) – the bot will provide a more consistent processing of the merge, and also ensures
greater transparency in the process – resulting in better audit trail (1)
c) Do you agree with the CFO’s argument that investment in a single M&A bot could be recouped
through future use? Explain why or why not. (2 marks)
No (1 – only if explained)
Each M&A will involve absorbing a different chart of accounts (1)
d) Should a single M&A bot be produced? Briefly outline the main reason for your answer (2
marks)
No (1 – only if explained)
(1) – for summary of recommendation (needs to be sensible)
IPC – Final Exam SM1 2021
Question 5 [29 Marks]
Campizo manufactures recreational vehicles (Campervans, Caravans, Camper tailers, etc). They have
recently discovered two issues in their goods receiving process and have asked for your help in
identifying the source of the issues.
Issue 1 – A new warehouse clerk discovered that one supplier (Six Axle), who supplies a range of
different parts, has not delivered any full purchase orders recently. Upon further investigation, there
seems to be a significant amount of stock missing across all parts supplied by Six Axle (and only Six
Axle), leaving only one week’s supply. The previous warehouse clerk is currently in Intensive Care
after having a car accident and is unable to be contacted. Six Axle is a long-term supplier and gets
paid on delivery.
Issue 2 – Safetya, the supplier of safety glass for windows in the campervans and caravans was
recently approved to be paid on delivery, and the supplier data store was updated to reflect this.
However, payment on delivery has yet to happen as Campizo is still processing each payment a few
days after delivery. Safetya has a policy of providing a few more parts than ordered to account for
any breakage in transport; any extra parts are counted as inventory.
To help you identify the problems, Campizo has provided you the following flowchart and points:
• All suppliers are pre-approved and sign a supply contract. The approval process includes
quality checks, with quality standards written into the contract. A visual quality inspection is
conducted on a sample of parts when delivered.
• Part suppliers are both local and international.
• Due to a boom in demand, and lockdowns around the world, Campizo aims to always keep 6
weeks of parts on-hand, so a supply issue from one key supplier does not interrupt
manufacturing.
• To be approved for automatic payment on delivery, suppliers need to have 12 months of
deliveries with no significant issues (e.g., bad quality or delivering wrong quantities). Once
approved, they are then paid on delivery until the end of the contract term.
• At the end of the day, the Warehouse Supervisor counts the number of delivery
dockets/purchase orders in their in-tray and cross matches against the number of goods
receipt records updated for that day to ensure that all deliveries are recorded.
IPC – Final Exam SM1 2021
IPC – Final Exam SM1 2021
Question 5.1 [9 Marks]
a) Identify an appropriate process goal for the (sub-)process depicted in the flowchart and
associated narrative. Explain why you have selected this process goal. (3 marks)
Receive the right goods (including count) and pay the right amount to the right supplier (1)
The diagram highlights the receiving stage, so it is ensuring that the right goods are received,
this are of suitable quality, and the count is correct (1), furthermore payment is made
immediately for the right suppliers (1). Deduct 1 mark if any mention of ordering.
b) Is the sampling Campizo undertakes to check the quality of the goods, and count the goods,
sufficient to produce good quality accounting information? Your answer should refer to
information quality goals. (3 marks)
Yes (1 – only if explained)
Quality checks are done before becoming a supplier, and standards written into supply contract
(1)
Sample checks are sufficient to ensure validity (1)
c) What is the purpose behind using a blind goods receipt report? Explain with reference to the
information quality goals (3 marks)
To ensure that the person counting the goods actually count and enters this information (1) and
not just accept the information from the purchase order (1) this helps both accuracy (0.5) and
completeness (details) (0.5)
Question 5.2 [9 Marks]
a) Identify and describe any weakness in the process (as described by the narrative and flowchart)
that could cause the issue with Six Axle. Your answer should discuss how the weakness
identified could impact the process/information quality goals. Discuss any impact on the
financial statements. (5 marks)
The issue here is that the previous staff member was colluding with the supplier (1). Students
should consider how this was allowed to happen, or not get detected. Simply stating that
collusion occurred does not identify the weakness.
There is no double count, and the Warehouse Clerk has access to the PO (1)
This potential for the Warehouse Clerk to enter the expected goods into the system and not
what is received (this information could also be provided by the supplier) (1)
As a result, inaccurate information is entered, and invalid information (1)
This would result in an overstatement of inventory (i.e., recording inventory that is not received)
(1)
b) What additional control(s), or change to the process, could the manager implement to reduce
this risk? Explain how this minimises the weakness identified. (2 marks)
A double count, and or not having access to the PO order (and possibly the DD) (1)
This is to ensure that the person counting actually counts and does not enter what is expected
(1)
IPC – Final Exam SM1 2021
c) Identify any potential issues that may arise as a result of your recommendation in (b), or explain
why there is no remaining issues (2 marks)
Mark against (b)
Cost of the any second person to double count (1)
Potential minor cost of process redesign to remove access to the PO, but enabling the PO to be
verified (1)
Question 5.3 [11 Marks]
a) Identify and describe any weakness in the process (as described by the narrative and flowchart)
that could cause the issue Safetya is complaining about. Your answer should discuss how the
weakness identified could impact the process/information quality goals. Discuss any impact on
the financial statements. (4 marks)
This issue is caused by the payment process needing an exact match of PO to GR (1) Safetya’s
policy of including additional items to account for breakages, and any breakages means it’s
unlikely that GR = PO (1)
This causes a process goal issue of not paying on time (1). This could potentially understate
Accounts Payable until paid, as Campizo has an agreement to pay on delivery (1).
b) What additional control(s), or change to the process could the manager implement to reduce
this risk? Explain how this minimises the weakness identified. (2 marks)
Change the exact match of PO=GR to PO<=GR. (1)
This would minimise the risk of not paying as the tolerance would allow close matches to be
paid. (1)
c) Identify ONE performance measure (i.e., KPI) that could be used to evaluate the improvements
after the introduction of the control (or process change) that you recommended in (b). (1 mark)
Mark against (b)
Example KPI: PO not paid same day as received for suppliers on this arrangement (1)
d) Explain how the performance measure (KPI) selected in (c) above relates to the process
objectives (2 marks)
The issue is around paying suppliers the right amount at the right time (1), this would help
measure if the right time is achieved (1)
e) Describe how the performance measure (KPI) selected in (c) above would be calculated. Your
answer should include what data is needed and where it would come from (2 marks)
This could be calculated by looking at GR date and payment date in the system for the PO and
see if they match (1), any mismatches will be counted (1)