Accounting Information Systems 7th Edition by Cynthia Heagy,Constance Lehmann

Exercise 22

Jose acquired a new AIS for his medical supplies company that serves small hospitals in western Colorado and Utah. The system ran smoothly for 6 months, and then the billing program would bomb out every time his accountant tried to execute it. His VAR disclaimed any responsibility because Jose did not have a support agreement. The software was developed by a Canadian-based company that just filed for bankruptcy. Because he was unable to bill his customers, Jose fell behind in paying suppliers and defaulted on a $5,000 note to his bank. The suppliers cut off his credit, refusing to ship orders, and the bank then called all of Jose's loans and froze his cash account. Jose was unable to meet the payroll, and most of his employees left. Yesterday, Jose filed for bankruptcy and also filed suit against the VAR for $1,000,000 actual damages and $2,000,000 punitive damages, because the inability to bill triggered the series of events.