Bonipart Transportation and Logistics Company

Bonipart is a transportation and logistics company with its head office in Moncton, New Brunswick. The
company operates a large call centre to facilitate shipping of goods across North America. The company is
responsible for ensuring that goods are shipped to their destinations on time and accompanied by all supporting
documentation. As a result, the company incurs significant costs related to the purchase of office supplies and
printing-related services. The company uses a customized database solution to enter and track purchases as
follows:
1. Prior to making a purchase, a Bonipart authorized purchaser will setup a purchase requisition (PR) in the
system. The PR will then be sent to the accounting department, where it will await approval upon review. Once
the PR has been approved, a purchase order (PO) will be issued. As a result of the PO being issued, the system
will generate a transaction (recorded in the database) encumbering the amount of the PO (to reserve the
amount to be paid).
2. Once an approved PO has been created, the system will send a copy to the supplier. This is sent by fax,
provided that the vendors information has been properly entered into the system. Supplier information is
entered by the accounting clerk after the controllers approval.
3. The supplier will then ship the ordered goods according to the specifications of the purchase order along
with the invoice. Upon receipt of the goods, an inspection is performed to ensure that the quantity is correct
and that a PO is referenced on the invoice. If the inspection is satisfactory then an employee in the reception
area will sign the invoice and print his or her name on it to indicate compliance. The signed invoice will then
be reviewed by a purchasing officer for approval.
4. Approved invoices are sent to the accounting department, so that early payment can be made to take
advantage of the 2% discount, if it is offered, within 10 days of the invoice date. Only two of Boniparts
suppliers (Office Supplies Inc. and ABC Printing Inc.) offer such a discount.
5. Once the accounting department has received an approved invoice, a cheque is issued for payment. Invoice
information is entered into the system, which will reference the original PO and reverse the encumbrance
(amount reserved to be paid), as well as identify the person from the reception area who approved the invoice
for payment.
In the past there has been no examination of system records to reconcile amounts paid versus the encumbrance
amount that was recorded in the system. The controller has asked that tests be conducted on the data provided
for January 2010, and if necessary, be extended to all transactions in 2010.

TRANSACTIONS
TRANS_I
D
DOC_COD
E
TRANS_DAT
E
ACTUAL
S
ENCUMBRANCE_AM
T
ENCUMB_NU
M
1 PO1234 12/18/2009 $0.00 $1,000.00
2 IN2111 1/5/2010 $0.00 $1,000.00 PO1234
3 IN2111 1/5/2010 $1,000.00 $0.00 PO1234
4 PO1235 1/6/2010 $0.00 $2,000.00
5 IN2112 1/10/2010 $0.00 $2,000.00 PO1235
6 IN2112 1/10/2010 $1,960.00 $0.00 PO1235
7 PO1236 1/12/2010 $0.00 $800.00
8 IN2113 1/19/2010 $0.00 -$800.00 PO1236
9 IN2113 1/19/2010 $980.00 $0.00 PO1236
10 PO1237 1/8/2010 $0.00 $1,500.00
11 IN2114 1/19/2010 $0.00 -$1,500.00 PO1237
12 IN2114 1/19/2010 $1,500.00 $0.00 PO1237

TRANS_I
TRANS_ID: A unique number for each record of transaction
DOC_CODE: A unique alphanumeric sequence to identify an invoice (beginning with IN) or a purchase
order (beginning with PO)
TRANS_DATE: The date of the transaction record
ACTUALS: The transaction amount that affects the ledger
ENCUMBRANCE_AMT: The amount approved for the payment requested, recorded as an encumbrance
ENCUMB_NUM: The PO number associated with an invoice payment transaction

INVOICES

INV_NUM: A unique alphanumeric sequence to identify an invoice (beginning with IN); same as the
DOC_CODE in the TRANSACTIONS table
INV_DATE: The date of the invoice
VENDOR: Name of the vendor, as printed on the vendor invoice
INV_AMT: The total invoice amount to be paid
APPROVED_BY: Identification of the employee who approved the invoice for payment; same as the
EMP_ID in the EMPLOYEES table

EMPLOYEES

EMP_ID: A unique number for each employee
EMP_NAME: Name of the employee

13 PO1238 1/24/2010 $0.00 $2,500.00
14 IN2115 1/25/2010 $0.00 -$2,500.00 PO1238
15 IN2115 1/25/2010 $2,500.00 $0.00 PO1238
INV_NUM INV_DATE VENDOR INV_AMT APPROVED_BY
IN2111 12/29/2009 Office Supplies Inc. $1,000.00 100
IN2112 1/8/2010 Office Supplies Inc. $2,000.00 100
IN2113 1/14/2010 ABC Printing Inc. $1,000.00 101
IN2114 1/19/2010 Tim Tan $1,500.00 101
IN2115 1/8/2010 XYZ Computer $2,500.00 103
EMP_ID EMP_NAME
100 Jane Jones
101 Tim Tan
102 Steve Sagar
103 Flora Fisher
104 Ling Lee
Required
a. Using the information provided, describe the procedures that you would employ using an analytical software
tool such as ACL to fulfill the controllers request. State the conclusions that you would reach as a result of
these procedures. (10 marks)

Sine we are concerned about the reconciliations of the the systems amounts, amount paid versus the
encumbrance_amt, The transaction table should be merged with the invoices table to see who the vendors are,
their balances and if the vendor is one of the two that offers Boniparts a discount. The transaction table relates
to the Invoices Table because the DOC CODE is A unique alphanumeric sequence to identify an invoice
(beginning with IN) or a purchase order (beginning with PO) which corresponds with the INV Num which is A
unique alphanumeric sequence to identify an invoice (beginning with IN); same as the DOC_CODE in the
TRANSACTIONS table. Additionally, the Invoices table and the employees table should be joined together to
know which employe approved the transactions. The two tables are similar because the Invoices table field
APPROVED_BY: Identification of the employee who approved the invoice for payment; same as the EMP_ID
in the EMPLOYEES table, which in turn shows the name of the employee with the corresponding employee
number. After merging the tables we could run an ACL test to extract all transactions with ATUALS amounts
are greater than the ENCUMBERANCE_AMT. We can also stratify on DOC_CODE to show tables with only
the Invoices and a separate table with only the purchase orders.

In conclusion, we can note from the exhibits provided that the PO1234 is a PO from 2009 carried over into
2010, the corresponding invoice IN2111 and IN2112 dated 12/18/2009 and 1/8/2010 is from the same vendor
Office Supplies Inc., a vendor that Boniparts should receive a discount. When we compare the actual amount
to the encumbrance we see that the amount paid was $1,960 versus invoice amount of $2000, therefore it can
be assumed that the accounting department is doing a good job taking advantage of the discount, paying the
bill within 10 days as prescribed by the invoice. ($2000-2%)= $1960

The actual amount for Invoice for invoice 2213 shows $1000, however the total amount of encumbrance shows
$800, while the actual amount shows $980. The actual amount been greater than the encumbrance shows there
is a control deficiency. Additional, the employee who approves the job (Tim Tan), failed to notice the
difference between the PO and the invoice amount upon receiving the goods from the supplier.


For Invoice 2114, the vendor is the same as an employee. This is a violation of the segregation of duties
concept and more a conflict of interest for Boniparts. Tim Tan can easily approve fake POs and conceal
frauds paying himself several payments, setting himself up as a vendor when he is not. If Tim Tan is an actual
vendor and has his own private business and sells parts to Biniparts, he should have no authority to approve
POs more so to work in the accounting department.

Finally, for Invoice 2215 with the PO 1238 created on 1/24/2010 surprising turn up an invoice date of
1/8/2010. This is rather suspicious and should be investigated, because all other Purchase order had an Invoice
date after the purchase order is created. Additionally, according to companys customized database solution
procedures, prior to making a purchase, a Bonipart authorized purchaser will setup a purchase requisition (PR)
in the system. The PR will then be sent to the accounting department, where it will await approval upon
review. Once the PR has been approved, a purchase order (PO) will be issued. As a result of the PO been
issued, the system will generate a transaction (recorded in the database) encumbering the amount of the PO (to
reserve the amount to be paid). The supplier will then ship the ordered goods according to the specifications of
the purchase order along with the invoice. Upon receipt of the goods, an inspection is performed to ensure that
the quantity is correct and that a PO is referenced on the invoice. If the inspection is satisfactory then an
employee in the reception area will sign the invoice and print his or her name on it to indicate compliance. The
signed invoice will then be reviewed by a purchasing officer for approval.

b. Identify two control weaknesses in the purchasing process and provide recommendations for each weakness
on how they can be addressed. (4 marks)
Weak Controls
1. System allows the creation of Invoice before the PO is created as in the case of Invoice 2115
2. No verification of current vendors, employees can simply add themselves to the vendor list

Recommendations
1. Company should have an up to date master list of vendors. . In addition, The employee number should be
cross referenced with the name of the supplier to see if there is any linkage. If the employee does carry on
their own private business and wishes to sell the company some goods, someone else, say a supervisor of
the manager depending on the size of the firm should approve such transaction, The employee should not
be able to approve an POs under their own name. This should give attention flags when the employee tries
to do so, and be logged in the error log file.

2. The system should not allow an employee to create an Invoice with a date before the PO is created. The
PO date should be required when creating the Invoice and cross referenced with this cell before the system
accepts such request. If an employee tries to put an Invoice date before the date of the PO ,the system
should flag such entry and have on screen notification advising the employee that the Invoice date must be
after the PO date. All transactions approved by TIM TAN should be investigated, He might be committing
fraud without the company knowing.

c. Describe the two types of computer-assisted audit techniques (CAAT), and indicate which one was used in
this case. (4 marks)

Data-oriented techniques use computer programs to select, retrieve, summarize, and process data for

the purpose of verifying its completeness and accuracy. These techniques are normally used in

carrying out substantive testing, but can also be used for testing compliance, where the evidence of

compliance with controls is contained within the computerized data, as is the case in this question.

Systems-oriented techniques use computer programs to examine and verify the internal controls of the

organizations computer system. The organizations computer system is tested and examined to

confirm that it performs according to specifications and that the built-in control procedures are

adequate.

Boniparts used data-oriented CAATs in this case.