Page 283 - Accounting Information Systems

254 PART II Transaction Cycles and Business Processes

Subsequently, the accounting department’s accounts 6. Premier Sports Memorabilia (Networks
payable clerk receives the supplier’s invoice, which she Computer System with Manual
matches and reconciles to the previously received purchase Procedures)
order from the receiving clerk. From her department
PC the accounts payable clerk then updates the digital (Prepared by Chris Polchinski, Lehigh University)
accounts payable subsidiary ledger to reflect the new liabil- Premier Sports Memorabilia is a medium-sized, rapidly
ity and records the event in the digital purchases journal. growing online and catalogue-based retailer centered in
Brooklyn, New York. The company was founded in
Cash Disbursements Procedures 1990 and specializes in providing its customers with
authentic yet affordable sports memorabilia from their
The accounts payable clerk in the accounting department
favorite players and teams, past and present. Tradition-
reviews the liabilities that are due by searching the
ally the company’s customers were located in the north-
accounts payable subsidiary ledger from the department
east region of the United States. Recently, however,
PC. The clerk then prints out a hard-copy cash disburse-
Premier launched a successful ad campaign to expand
ment voucher for each item due for payment. The clerk
its customer base. This has increased sales, which
then sends cash disbursements voucher to the cash dis-
has in turn placed a strain on the organization’s opera-
bursements department for payment. At the end of the
tional resources. The company currently employs 205
day the clerk prints a hard-copy accounts payable sum-
employees who are spread out among its three ware-
mary from the department PC and sends it to the general
houses and two offices in the tri-state area.
ledger department.
The firm purchases from a large number of manufac-
From his department PC, the cash disbursement clerk
turers and memorabilia dealers around the country and
uses the cash disbursement voucher to record the pay-
is always looking for additional contacts who have new
ment in the digital check register and then prints a
or rare items to offer.
three-part check. The clerk signs the negotiable portion
The company has a computer network installed, which,
of the check and sends it to the vendor. One check copy
until recently, has served it well. The firm is now, how-
is filed in the department and the clerk sends the second
ever, experiencing operational inefficiencies and account-
check copy, along with the original cash disbursement
ing errors. Your firm has been hired to evaluate Premier’s
voucher, to the accounting department accounts payable
business processes and internal controls. The expenditure
clerk. At the end of the day the clerk prints a hard-copy
cycle is described in the following paragraphs.
summary of the check register and sends it to the gen-
eral ledger department.
From the accounting department PC, the accounts Purchase System Procedures
payable clerk uses the check copy and cash disburse-
Premier’s purchase transactions are initiated when its
ment voucher to record the payment in the digital check
inventory levels for a certain item falls below the desig-
register and to close out the liability in the digital
nated reorder point. This is electronically monitored
accounts payable subsidiary ledger. The clerk then files
through Premier’s inventory requisition system that is
the hard-copy cash disbursement voucher and check
directly linked to the inventory file. Once an item falls
copy in the department.
below the reorder point, an open requisition record is
From the department PC, the general ledger clerk posts
automatically created. A valid vendor file is used both
the summaries received from the accounting and cash dis-
to retrieve stored vendor information and to check that
bursement departments to the appropriate general ledger
items are being ordered through a preapproved vendor
accounts. The clerk files the hard copy summaries in the
with which the company has done business in the past.
general ledger department.
Digital purchase requisitions are made available to the
Required clerks in the inventory control department and the pur-
a. Create a data flow diagram of the current system. chasing department via the computer terminal.
b. Create a system flowchart of the existing system. When the purchasing department clerk views the dig-
c. Analyze the internal control weaknesses in the ital requisition, she prepares and prints five hard copies
system. Model your response according to the six of the purchase order. One copy is filed in the depart-
categories of physical control activities specified in ment. A second copy is sent to the receiving department.
SAS 78/COSO. A third copy is sent to the accounts payable department.
d. Prepare a system flowchart of a redesigned computer- A fourth copy is sent to the inventory control depart-
based system that resolves the control weaknesses ment. A final copy is sent to the vendor as placement of
you identified. Explain your solution. the order.