Page 237 - Accounting Information Systems

208 PART II Transaction Cycles and Business Processes

Required copy, along with the goods, to the shipping department.
a. Create a data flow diagram of the current system. The warehouse clerk then updates the inventory subsidi-
b. Create a system flowchart of the existing system. ary file to reflect the items and quantities shipped. Upon
receipt of the stock release document, the sales clerk
c. Identify the internal control weaknesses in the system.
Use the six categories of physical control activities accesses the open sales order file from a terminal, closes
specified in SAS 78/COSO for your analysis. the sales order, and files the stock release document in
the sales department. The sales order system automati-
d. Prepare a system flowchart of a redesigned com-
puter-based system that resolves the control weak- cally posts these transactions to the sales, inventory
nesses that you identified. Explain your solution. control, and cost-of-goods sold accounts in the general
ledger file.
3. ABE Plumbing, Inc. (Centralized Small Upon receipt of the goods and the stock release, the
shipping department clerk prepares the goods for ship-
Business Accounting System)
ment to the customer. The clerk prepares three copies of
ABE Plumbing, Inc., opened its doors in 1979 as a
the bill of lading. Two of these go with the goods to the
wholesale supplier of plumbing equipment, tools, and
carrier and the third, along with the stock release docu-
parts to hardware stores, home-improvement centers,
ment, is filed in the shipping department.
and professional plumbers in the Allentown-Bethlehem-
The billing department clerk reviews the closed sales
Easton metropolitan area. Over the years they have
orders from a terminal and prepares two copies of the
expanded their operations to serve customers across the
sales invoice. One copy is mailed to the customer and the
nation and now employ over 200 people as technical
other is filed in the billing department. The clerk then cre-
representatives, buyers, warehouse workers, and sales
ates a new record in the account receivable subsidiary file.
and office staff. Most recently ABE has experienced
The sales order system automatically updates the account
fierce competition from the large online discount stores
receivable control account in the general ledger file.
such as Harbor Freight and Northern Supply. In addi-
ABE has hired your public accounting firm to review
tion, the company is suffering from operational ineffi-
its sales order procedures for internal control compli-
ciencies related to its archaic information system.
ance and to make recommendations for changes.
ABE’s revenue cycle procedures are described in the
following paragraphs.
Required
Revenue Cycle a. Create a data flow diagram of the current system.
ABE’s sales department consists of 17 full-time and b. Create a system flowchart of the existing system.
part-time employees. They receive orders via traditional
c. Analyze the internal control weaknesses in the sys-
mail, e-mail, telephone, and the occasional walk-in.
tem. Model your response according to the six catego-
Because ABE is a wholesaler, the vast majority of its ries of physical control activities specified in the
business is conducted on a credit basis. The process SAS 78/COSO control model.
begins in the sales department, where the sales clerk
d. Prepare a system flowchart of a redesigned com-
enters the customer’s order into the centralized com- puter-based system that resolves the control weak-
puter sales order system. The computer and file server nesses that you identified. Explain your solution.
are housed in ABE’s small data processing department.
If the customer has done business with ABE in the
past his or her data are already on file. If the customer is 4. Walker Books, Inc. (Manual System with
a first-time buyer, however, the clerk creates a new Minimal PC Support)
record in the customer file. The system then creates a
record of the transaction in the open sales order file. (Prepared by Matt Wisser, Lehigh University)
When the order is entered, an electronic copy of it is Walker Books, Inc., is the fastest-growing book dis-
sent to the customer’s e-mail address as confirmation. tributor in the United States. Established in 1981 in Palo
A clerk in the warehouse department periodically Alto, California, Walker Books was originally a side
reviews the open sales order file from a terminal and project of founder and current president Curtis Walker,
prints two copies of a stock release document for each who at the time was employed by a local law firm.
new sale, which he uses to pick the items sold from the Because reading was much more than just a hobby of
shelves. The warehouse clerk sends one copy of the his, he decided to use some of his savings to buy an aban-
stock release to the sales department and the second doned restaurant and convert it into a neighborhood