Best+Enterprises+for+Students - Look for good controls and...

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Look for good controls and control weaknesses. Best Enterprises: Assessing Internal Controls in a Computer-Based Information System Background Best Enterprises manufactures and distributes frozen bakery, dessert, and entree items. Ronald and Kim Mikesell founded the company ten years ago in Cincinnati, Ohio. The company’s original product line consisted of very high-quality frozen breads and dinner rolls. In its fifth year of operations, Best Enterprises added a line of fine frozen dessert items to its product offerings. During the past three years, the company’s assets and sales doubled with the acquisition of two Michigan companies that manufacture specialty frozen entrees. Although many of the company’s products are sold to grocery chains and grocery wholesalers, some of the items are sold only to companies that supply restaurants. Best Enterprises is a privately held company, and its headquarters is located at its Cincinnati production facility. Best Enterprises plans to expand its Michigan plants and has decided to go public in an effort to execute these plans. The company’s goal is to file an initial public offering six months from now. As a public company, Best Enterprises will be required to comply with the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act requires management to annually assess the effectiveness of the company’s internal control over financial reporting. This assessment must be included with the company’s annual report, and the company’s external auditor must attest to this assessment. In preparation for compliance with Section 404, Best Enterprises’ has established a 404 Implementation Committee led by the company controller. With the approval of the audit committee of its board of directors, Best Enterprises has engaged an audit firm to assist with its 404 project. This is the only service that the audit firm provides for Best Enterprises. 1
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You are a staff auditor in the audit firm and have been assigned to this engagement. You are part of a team that is charged with identifying controls and control weaknesses in Best Enterprises’ acquisition/payment process and in the design of general IT controls that regulate physical security of the data center, logical access to programs and data, program changes, and data backup and recovery. Through interviews and observations, your team gains an understanding of Best Enterprises’ acquisition/payment process, information technology, and internal-control design. An account of these interviews and observations is presented below. The Acquisition/Payment Process Our team began its work by talking with the Chief Financial Officer (CFO), Bill Dixon. We learned that Best Enterprises consolidated the accounts payable (AP) functions for all of its plants at its Cincinnati headquarters eighteen months ago. At that time, the company implemented Jasper AP software and Disbursement Manager 4.0 (DM) checkwriter software. Jasper AP interfaces with the Album image system to provide access to electronically-stored
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This note was uploaded on 03/19/2012 for the course ACC 361 taught by Professor Eighme during the Fall '10 term at Miami University.

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Best+Enterprises+for+Students - Look for good controls and...

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