Page 369 - Accounting Information Systems

340 PART II Transaction Cycles and Business Processes

Once the cost accounting department has received all The production planning and control department is led
the necessary information from the other departments, by Mr. Brackenbury. Once the inventory status report is
the work-in-process file is updated. All work center received, as well as the sales forecasts from marketing,
documents (move tickets, job tickets, materials requisi- Mr. Brackenbury takes a copy of the bill of materials and
tions, excess materials, and materials returns), along route sheet and assesses the inventory requirements. If
with a copy of the work order, are filed in the cost the inventory amounts are adequate, Mr. Brackenbury
accounting department. At the end of the phase, the cost prepares a production schedule, work order, move tickets,
accounting department prepares a journal voucher and and materials requisitions, which he sends to the work
sends it to the general ledger department. This journal centers. Mr. Brackenbury then sends a purchase requisi-
voucher, along with the one sent by inventory control, is tion to the purchasing and storekeeping departments.
used to update the general ledger. Both journal vouchers Mr. Brackenbury also heads the various work cen-
are kept on file in the general ledger department. ters, and the supervisors of the different work centers
report to him. These supervisors, upon receipt of the
Required aforementioned documents, send the materials requisi-
a. Create a data flow diagram of the current system. tions to the storekeeping department, and Mr. Holt
b. Create a system flowchart of the existing system. sends the necessary materials to the work center. He
then files a copy of the materials requisition and updates
c. Analyze the internal control weaknesses in the sys-
tem. Model your response according to the six cate- the raw material inventory ledger. At the end of each
gories of physical control activities specified in the day, he sends a copy of the materials requisitions to the
SAS 78/COSO control model. cost accounting department. He also sends a journal
voucher for the use of materials and a journal voucher
d. Prepare a system flowchart of a redesigned com-
puter-based system that resolves the control weak- for finished goods to the general ledger department.
nesses you identified. Explain your solution. In the work centers, the managers of each center col-
lect the employees’ time cards and send them to cost
accounting, along with a copy to payroll. They also
2. SAGA Fly Fishing, Inc.—Internal send the job and move tickets, which outline the various
costs that have been incurred, to cost accounting.
Controls Assessment
Ms. Kay, who heads the cost accounting department,
SAGA Fly Fishing, Inc., is a manufacturer of high-
collects all of the data, determines the overall cost,
quality fly-fishing equipment that includes rods, reels,
compares it to the standard costs, and determines the
fly lines, nets, drift boats, waders, and other equip-
variances. Only the total variances are compared; the in-
ment. It also produces low-end and moderately priced
formation is then used to evaluate managers and super-
spinning rods and saltwater fishing equipment, which
visors of the various departments. Ms. Kay updates the
it sells under a different brand name to protect the
work-in-process files and finished goods inventory files.
high-quality image associated with its fly-fishing divi-
She then creates a journal voucher and sends it to the
sion. Its home office/fly-fishing production plant is
general ledger department.
located near Manchester, New Hampshire. The spin-
In the general ledger department, the information
ning and saltwater manufacturing plants are in upstate
from the journal vouchers is entered in the general
New York. In total, SAGA employs 1,500 workers.
ledger computer program, where the files are updated.
SAGA distributes its products worldwide through
The journal vouchers are filed.
three distribution centers. Sales are currently $200 mil-
lion per year and growing.
Although equipped with up-to-date production and Required
shop floor machinery, SAGA’s Manchester plant’s in- a. Create a data flow diagram of the current system.
ventory management, production planning, and control b. Create a system flowchart of the existing system.
procedures employ little computer technology. c. Analyze the internal control weaknesses in the sys-
The process begins in the storekeeping department, tem. Model your response according to the six cate-
where Mr. Holt controls the inventory and maintains the gories of physical control activities specified in the
inventory records. He checks daily on the inventory SAS 78/COSO control model.
control files to assess the raw material inventory needs d. Prepare a system flowchart of a redesigned com-
and sends an inventory status report to production plan- puter-based system that resolves the control weak-
ning and control. nesses you identified. Explain your solution.