Page 328 - Accounting Information Systems

CHAPTE R 6 The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures 299

Required general ledger clerk, who reconciles it to the summary
a. Create a data flow diagram of the current system. report and posts to general ledger.
b. Create a system flowchart of the existing system.
Required
c. Analyze the internal control weaknesses in the a. Create a data flow diagram of the current system.
system. Model your response according to the six b. Create a system flowchart of the existing system.
categories of physical control activities specified in
SAS 78/COSO control model. c. Analyze the internal control weaknesses in the
system. Model your response according to the six
d. Prepare a system flowchart of a redesigned computer- categories of physical control activities specified in
based system that resolves the control weaknesses the SAS 78/COSO control model.
you identified. Explain your solution.
d. Prepare a flowchart of a redesigned computer-based
system that resolves the control weaknesses you
identified. Explain your solution.
3. A&V Safety, Inc.—Payroll Processing
System (Manual Process)
4. Music Source, Inc.—Payroll and
(Prepared by Aneesh Varma, Lehigh University) Fixed Assets (Manual System with
A&V Safety, Inc., is a growing company specializing in
the sales of safety equipment to commercial entities. It Some PC Support)
currently employs 200 full-time employees, all of whom (Prepared by Jeff Davis, Gen Feldman, and Denise
work out of their headquarters in San Diego, California. Nuccio, Lehigh University)
During the summer, the company expands to include Music Source, Inc., is a manufacturer of stereo equip-
summer interns who are delegated smaller jobs and ment with six sales offices nationwide and one manu-
other errands. The A&V payroll process is presented in facturing plant in Pennsylvania. Currently, employment
the following paragraphs. is at approximately 200 employees. Music Source
A&V Safety, Inc., supervisors collect and review focuses on the production of high-quality stereo equip-
employee time cards, which they forward to the payroll ment for resale by retailers. Its larger competitors
department. During payroll processing, individual em- include Sony, Panasonic, and Aiwa.
ployee wage rates are manually pulled from the person-
nel file based on the employee ID. Interns working for Payroll System
A&V, however, do not receive employee identification
cards and numbers because they are at the firm for only The payrolls of all six sales offices and the manufactur-
10 weeks. In such cases, the immediate supervisor ing plant are processed centrally from the main office.
writes the wage rate on the time cards prior to submis- On Thursday, every two weeks, employees enter their
sion to the payroll department. hours-worked data from their personally maintained
The payroll clerk then manually prepares the payroll time cards into computer terminals located in each sales
checks, updates the payroll register, and files the time office and work area. The computer system validates
cards in the department. She sends a copy of the payroll the employee by checking his or her identification num-
register to the accounts payable clerk who updates the ber against the employee history file, which is located
accounts payable ledger for wages payable. The payroll in the main plant IT department. This task must be com-
clerk then sends a payroll summary to the general pleted by noon on the designated day. At the end of the
ledger. Finally, the payroll clerk sends the paychecks to validation process, the work area (sales office or manu-
the cash disbursement department, where they are facturing) supervisor prints a personnel action form
signed and forwarded to supervisors, who distribute from the validation terminal and forwards it, along with
them to their respective employees. the employee time cards, to the payroll clerk in the main
The signed copies of the payroll checks are returned office payroll department.
to the payroll department, where they are matched to Upon receipt of the time cards and personnel action
the payroll register and filed locally. The cash disburse- forms, the payroll clerk manually updates the employee
ments clerk prepares a list of verified recipients. She records and then prepares the payroll register. A
sends one copy of the list to the accounts payable copy of the payroll register, along with the time cards,
department. The accounts payable clerk uses the list to and the personnel action form are filed in the payroll
update the accounts payable ledger to close out the department. A second copy of the payroll register is
wages payable account. The cash disbursements clerk sent to general ledger clerk, who posts to the general
sends a second copy of the list of recipients to the cash account and wages expense for the full amount