Page 239 - Accounting Information Systems

210 PART II Transaction Cycles and Business Processes

The billing department clerk receives the customer The general ledger department receives the account
invoice and ledger copy of the sales order from the sales summary and the journal voucher from the AR depart-
department and the shipping notice from the shipping ment and cash receipts, respectively. The clerk reviews
department. The billing clerk then adds prices and other the two documents and updates the control accounts in
charges to the invoice, which she sends to the customer. the digital general ledger via the department PC.
The clerk files the shipping notice in the department Finally, the clerk files the account summary and journal
and sends the ledger copy to the accounts receivable voucher in the department.
department.
The clerk in the AR department receives ledger copy Required
of the sales order and uses it to manually update the a. Create a data flow diagram of the current system.
hard-copy AR subsidiary ledger. The clerk then files b. Create a system flowchart of the existing system.
the ledger copy in the department. At the end of day, c. Analyze the internal control weaknesses in the sys-
the AR clerk prepares an account summary and sends it tem. Model your response according to the six cate-
to the general ledger department. gories of physical control activities specified in SAS
Upon the receipt of the journal vouchers and the 78/COSO.
AR summary, the general ledger department clerk rec- d. Prepare a system flowchart of a redesigned com-
onciles the documents and updates the appropriate puter-based system that resolves the control weak-
control accounts in the digital general ledger via his nesses you identified. Explain your solution.
computer terminal. The documents are then filed in the
department.
5. A&V Safety, Inc. (Manual and Stand-
Alone Computer Processing)
Cash Receipts System (Prepared by Adam Johnson and Aneesh Varma, Lehigh
The cash receipts process begins in the mail room, University)
which is staffed with many employees who have the A&V Safety, Inc., is a growing company specializing in
responsibility of receiving and opening both routine the sales of safety equipment to commercial entities. It
mail (catalogs, advertisements) and mail containing cus- currently employs 200 full-time employees, all of whom
tomer payments. Each mail clerk opens the envelope work out of their headquarters in San Diego, California.
and separates the check and remittance advice. The During the summer, the company expands to include
clerk reconciles the two and then manually adds each about 10 summer interns who are delegated smaller jobs
receipt to a common remittance list. When all customer and other errands. A&V currently competes with Office
payments have been so processed, the finished remit- Safety, Inc., and X-Safe, who lead the industry. Suppli-
tance lists and the associated checks are sent to the cash ers for A&V include Halotron Extinguishers, Kadelite,
receipts department. The remittance advices are sent to and Exit Signs, Inc. A&V attempts to maintain inven-
the accounts receivable department. tory levels sufficient to service two weeks of sales. This
The cash receipts clerk receives the checks and the level has shown to avoid stock-outs, and the excess in-
remittance list, which he reconciles. At that time he ventory is held in a warehouse in a suburb of San
endorses each check ‘‘For Deposit Only’’ and manually Diego.
records it in the hard-copy cash receipts journal. He A&V has a legacy accounting system that employs a
then sends the signed checks and remittance list to the combination of manual procedures supported by stand-
accounts receivable department. At the end of day alone PCs in the various departments. Recently they
the clerk manually prepares a journal voucher summa- have experienced business inefficiencies that have been
rizing the cash receipts and sends it to the general ledger linked to their antiquated accounting system. You have
department. been retained by A&V management to review their pro-
The AR clerk receives the remittance advices, the cedures for compliance with the Sarbanes-Oxley Act
checks, and the remittance list. He reconciles them and and to provide recommendations for improvement. The
manually posts the amounts received to the customer A&V expenditure cycle is presented in the following
accounts in the hard-copy AR subsidiary ledger. The paragraphs.
clerk files the remittance advices and the remittance list
in the department. He next prepares a deposit slip and Revenue Cycle
sends it, along with the checks, to the bank. Finally, the A&V Safety, Inc., has one sales department at its head-
clerk manually prepares a hard-copy account summary, quarters in San Diego. Sales representatives visit current
which he sends to the general ledger department. and potential clients in sales districts and all customer