Assume that you are part of the highly qualified IT Governance Committee employed by one of the US’s largest pizza company named as ‘Eagle Boys Pizzeria’ a pizza company which is internationally recognized and one of the delicious pizza company globally.
Your IT Governance Committee is in-charge of governing the overall development and operation of IT/IS systems and has several important responsibilities such as:
Aligning IT investments to business strategy. Investing funds and resources in the most beneficial IT systems will enhance the long-range goal of achieving the business strategy.
Budgeting funds and personnel for the most effective use of the IT systems.
Overseeing and prioritizing changes to IT systems. Within organizations, many user groups will concurrently request improvements or changes to their sub-system within the IT system and prioritizing these requests according to the best match to the business strategy and the feasibility of designing, developing and implementing the necessary changes.
Developing, monitoring and reviewing all IT operational policies. The organization will maintain policies and descriptions of procedures for operating and developing its IT systems.
Developing, monitoring and reviewing security policies. The organization will maintain policies and descriptions of procedures related to security.
Establishing systems development process that controls the initiation, approval, development and maintenance of those changes. This process called the systems development life cycle (SDLC) can be generally described as the systematic steps undertaken to plan, prioritize, authorize, oversee, test and implement large-scale changes to the IT system.
As part of the IT Governance Team you have been engaged to carry out its duties as per the requirements in the sections hereafter.
The company has been known for its ability to get ahead of national trends. For instance, in the early 1980s, Eagle Boys Pizzeria began offering delivery service; however, while the competitors were merely delivering pizzas, Eagle Boys Pizzeria delivered many additional items from its extensive menu. The company was also on the cutting edge when it launched its one-number telephone ordering system whereby a single telephone number was used to service sales orders for the entire region. Additional conveniences became available about ten years later when Eagle Boys Pizzeria introduced online ordering.
Recently, it has expanded its menu offerings and opened prototypes restaurants specially designed with new features (such as a full-service bar and a retail counter) that appeal to various customer groups. Each of these advancements has propelled Eagle Boys Pizzeria growth over the past four decades.
Dino’s name is also well known for its tradition of supporting neighborhood organizations. Eagle Boys Pizzeria promotes schools, amateur athletics and other community groups. Interestingly, some local student athletes were a tremendous help to Eagle Boys Pizzeria in 1971 when the business was in trouble. A fire had destroyed much of the building containing Eagle Boys Pizzeria original pizzeria and commissary. The commissary made menu ingredients for all of the Eagle Boys Pizzerias, so the entire business was in jeopardy when this facility became inoperable. Area students and coaches helped with the clean-up and rebuilding efforts that made it possible for the facility to be reopened in a fraction of the anticipated time. Dino thanked them by establishing a hall of fame that has become a fixture of Greater Pittsburgh high school athletics.
Eagle Boys Pizzeria reputation for great Italian food and innovations in both customer service and community service have contributed to the company’s ability to grow into the most popular pizzeria in the Greater Pittsburgh region. Eagle Boys Pizzeria sales include an average of 110,000 pizzas per week. It has managed to stay ahead of the national competitors, which is an unusual feat. In fact, many people in and around Pittsburgh believe that pizza can only be Eagle Boys Pizzeria!
3.0 Multiple Systems, Multiple Functions, Multiple Uses of Information
There are three ways to place an order at Eagle Boys Pizzeria: in-store, via telephone, or online.
In-store orders
In-store orders are taken by restaurant staff serving patrons dining in one of Eagle Boys Pizzeria restaurant or walking in to place an order. Servers manually complete an order ticket at the tableside and input the information into the company’s point of sales system through computer terminals located in the food preparation stations. Walk-in orders are typically entered directly into the system by staff using the computer terminal located at the counter.
Telephone orders
Approximately two-thirds of the company’s business is processed via the telephone. Eagle Boys Pizzeria phone ordering system is called a one-number system, referring to the convenience of ordering through a single phone number, regardless of the restaurant location nearest the customer
Most phone orders are received by an operator, who enters the order directly into a computer terminal while speaking with the customer. Customer phone numbers are used to present the customer with his or her choice of the nearest pizzeria for preparation and carry-out or delivery. The software in the system references a street database to verify that the street address exists. Credit card numbers are obtained from customers paying by credit card. The customer service representative verifies the order and credit card number before ending the call.
Upon confirmation of an order, the order is sent directly to the restaurant, where it is processed through the company’s transaction processing system and printed at the appropriate food preparation station(s). Credit card numbers are included in the transmission, and all credit card transactions are processed at the restaurants at the time the order is received.
There are several advantages of handling phone orders through a customer order center rather than at an individual restaurant location. Above all, the reduction in background noise improves the accuracy of the order-taking process. In addition, the customer’s wait time is greatly reduced. Before Eagle Boys Pizzeria implemented its one-number system, customers’ wait time at peak could be up to 15 minutes. The order center’s average wait time goal is now one minute or less.
Internet orders
To place an online order, a customer must be registered. Registration is a simple process that can occur anytime during business hours. Customers are asked to provide identifying information that will be retained in the system. Repeat customers will not have to go through the registration process again.
Web-based ordering is tied to the company’s one-number system. When a customer enters an order online, customer information is pulled from the one-number system. Identifying data such as phone number and address does not have to be entered. Menu offerings are presented on the screen in various drop-down boxes so that any combination of items can be ordered with many different choices of toppings or accompaniments. A customer must answer a series of questions regarding the order, similar to the questions that would be asked if the customer had been speaking with an operator.
Online orders also require confirmation of the menu items and restaurant location before the call is ended. Credit card information may be entered online and the transaction will be processed at the restaurant filling the order (as is done for telephone orders). Two firewalls protect the security of customer information submitted online.
Customer Service
Up to 135 customer service representatives may be on hand at the customer order center to process orders coming in to the business at peak. In addition, Eagle Boys Pizzeria employs approximately 10 home-based agents to handle incoming orders. Home-based agents may perform any of the customer service functions from a computer terminal located within their homes.
All operators are required to undergo a one-week training program before they begin serving customers. After the training program, operators are subject to one week of supervised on-the-job training, followed by ongoing performance evaluations. Supervisors at the customer order center perform order scanning, whereby orders are randomly reviewed for reasonableness. Order scanning is performed more frequently for orders taken by new operators. Supervisors also follow up on errors and customer complaints, and may listen in on calls to review the operator’s performance. If customers are in need of customer service, they may call or e-mail the company. Supervisors handle these types of calls and e-mail messages, and will respond either via telephone or reply e-mail. Restaurant managers can also print customer complaints at their respective locations.
Accounting Functions
Eagle Boys Pizzeria ordering systems and transaction processing systems are the source of all sales information sent to the accounting department. Restaurant managers prepare daily sales summaries and submit them to the company’s administrative offices on the following day. These summaries are transmitted electronically via the intranet and are received in the accounting department. Accounting staff prepare general ledger entries based upon these sales summaries and key the information into the company’s accounting software. The transaction processing system provides sales by restaurant for call-in and Internet orders, which are reconciled to the restaurant summaries on a daily basis. Once the accounting system is updated and the daily reconciliations are performed, the data is stored in an on-site server.
Although there is a lot of information to manage, coming from many different locations, and the capacity of the system is nearly 25 times its current load.
Information Technology
The information technology staff at Eagle Boys Pizzeria is continuously engaged in system maintenance activities. Because the business changes so frequently, systems maintenance is an ongoing process. Every time a new coupon is offered, a price is changed, or a new menu item becomes available, the related information must be integrated into the transaction processing system.
Each menu addition has its own level of complexity, and many of the items include options to customize to individual tastes in a plethora of combinations. This poses a challenge in ordering; however, the menu presentation continues to be improved to eliminate chances of an incomplete or incorrect order. The options are available online and to customer service representatives via drop-down boxes on their computer screens. Most screens require an entry, even if it is “none,” in order to ensure that no part of the order is forgotten.
You are the Chief Financial Officer of Eagle Boys Pizzeria involved as part of the IT Governance team to provide your opinion and solutions for the following questions: Consider the following issues that relate to Eagle Boys Pizzeria payroll and fixed assets systems, then answer the questions pertaining to these expenditures processes. As mentioned in the opening part of the Eagle Boys Pizzeria case, there are now 49 locations throughout the greater Pittsburgh area. Each one of those restaurant locations employs a full-time store manager and varying numbers of kitchen staff, servers, and delivery staff. The kitchen staff, servers, and delivery staff vary between full-time and part-time status. There tend to be high rates of turnover, especially among the part-time staff. Eagle Boys Pizzeria pays its employees on a weekly basis each Friday for the week ending on the previous Saturday. Employee paychecks include withholdings for federal taxes as well as state and local taxes applicable for the employee’s residence. Employees may live in one of the three states and over twenty-five municipalities that are included in the greater Pittsburgh regional area. All payroll accounting is handled by Eagle Boys Pizzeria at its home office. Each restaurant must also maintain various fixed assets in order to operate. Following is a general list of fixed assets for each store: • Furniture and store fixtures, including tables, chairs, and built-in items such as shelving, counters, and booths. • Kitchen equipment, such as refrigerators, stoves, ovens, and dishwashing machines • Computers Note that the number of each of these fixed assets maintained at each location varies, depending upon the size of the store. Also note that each member of the delivery staff uses his or her personal automobile (rather than a company-owned car) for customer deliveries. In addition, the home office maintains the following types of fixed assets: • Land and the office building • Office furniture and fixtures • Computers and other office equipment • Telephone systems Finally, fixed assets maintained at the commissary include the following: • Fixtures, such as built-in cabinets and shelving • Kitchen equipment • Computers • Delivery trucks All fixed asset accounting is handled by Eagle Boys Pizzeria at its home office. Required:
1. Considering the nature of the relationship between Eagle Boys Pizzeria home office and its franchise owners, the company may be quite vulnerable to theft or fraudulent financial reporting committed by these franchise owners. Describe the 3 components of the fraud triangle and how each would relate to a franchise owner’s likelihood to defraud Eagle Boys Pizzeria.
2. Identify 3 types of fraud to which Eagle Boys Pizzeria may be susceptible. For each of your three responses, indicate whether the fraud is classified as management fraud, employee fraud, vendor fraud, customer fraud, or computer fraud. In addition, for each of your three responses, suggest an internal control that could be implemented to prevent or detect the potential fraud.