Page 329 - Accounting Information Systems

300 PART II Transaction Cycles and Business Processes

of the payroll. Next, the payroll clerk prepares the Required
paychecks and sends them to the cash disbursements a. Create a data flow diagram of the current system.
department. These are signed by the cash disburse- b. Create a system flowchart of the existing system.
ments clerk, who then distributes the checks to the c. Analyze the internal control weaknesses in the
employees. system. Model your response according to the six
categories of physical control activities specified in
SAS 78/COSO.
Fixed Asset System
d. Prepare a system flowchart of a redesigned computer-
Asset acquisition begins when the user department man- based system that resolves the control weaknesses
ager recognizes the need to obtain new or replace an that you identified. Explain your solution.
existing fixed asset. The manager manually prepares
two copies of a purchase requisition; one copy is filed 5. Green Mountain Coffee Roasters,
temporarily in the department, and one is sent to the
purchasing department. From the purchase requisition, Inc.—Payroll and Fixed Asset
the purchasing department clerk manually prepares Systems (Manual and Stand-Alone PC
three copies of a purchase order. One copy is sent to the Procedures)
supplier, another copy is sent to the accounts payable
(Prepared by Christina Brown, Lehigh University)
department, and the third copy is filed in the purchasing
Green Mountain Coffee Roasters, Inc., was founded in
department. When the asset arrives, the user department
1981 and began as a small cafe in Waitsfield, Vermont,
receives it along with the packing slip. The packing slip
roasting and serving premium coffee on the premises.
and goods are reconciled with the purchase requisition
Green Mountain Coffee has a warehouse and manufac-
on file, then the packing slip and requisition are filed
turing plant located in Wilton, Vermont, where it pres-
permanently in the user department.
ently employees 250 full-time and part-time workers.
The accounts payable clerk receives the purchase
Your firm has been hired to review Green Mountain’s
order from the purchasing department and files it tempo-
internal controls over its payroll and fixed asset
rarily. Upon receipt of the invoice from the vendor, the
procedures.
accounts payable clerk reconciles it with the purchase
order on file. Using the department PC, the accounts pay-
able clerk then sets up an account payable and records Payroll System
the asset in the fixed asset inventory ledger. The clerk In the Green Mountain production departments, each
then prints a cash disbursements voucher and sends it to worker records the number of hours he or she has worked
the cash disbursements department. At the end of the each day by clocking in and out on a time card machine.
day, the clerk prints account summaries for accounts pay- The supervisor, Toni Holland, oversees this process and
able and fixed asset inventory, which she sends to the each week sends the hard-copy time cards to the payroll
general ledger department. The purchase order and department. Using a stand-alone PC, the payroll depart-
invoice are permanently filed in the department. ment clerk enters time card data and prepares hard-copy
The cash disbursements clerk receives the cash dis- paychecks. This process automatically updates the digital
bursements voucher from accounts payable and man- employee payroll records. The clerk files the time cards
ually prepares a check, which he sends to the vendor. in the payroll department and sends the employee pay-
The clerk then manually records the check in the check checks to Toni to review and distribute to the employees.
register. At the end of the day, the clerk sends a hard- The payroll clerk also prepares three copies of a payroll
copy journal voucher to the general ledger department. register. Copies one and two are sent to accounts payable
When an asset has reached the end of its useful life, and the general ledger departments, respectively. The
the user department manager prepares a disposal report clerk files copy three in the payroll department. Upon
and sends it to the accounts payable clerk, who adjusts receipt of the payroll register, the accounts payable clerk
fixed asset inventory record. The general ledger depart- manually prepares a check for the entire payroll, which
ment clerk reconciles the journal voucher, the accounts she deposits in the payroll imprest account at the bank. A
payable summary, and the inventory summary that it copy of the check is filed in the department along with
has received from accounts payable and cash disburse- the payroll register. Using the payroll register and the
ments. These figures are then posted to the general department PC, the general ledger department clerk posts
ledger, and the account summaries and journal vouchers to the appropriate general ledger control accounts. The
are filed in the documents. clerk then files the payroll register.