Background
You are recently employed as a business analyst at Bell Studio, an Adelaide-based wholesaler of art
supplies. Bell Studio sources its inventories from manufacturers in Australia, China, Japan and New
Zealand. The company has a centralised accounting system with networked terminals at different
locations. Bell Studio’s expenditure cycle procedures are described as follow:
Purchases System
The process begins when the purchasing clerk checks the inventory subsidiary ledger at his/her
computer terminal each morning. When the quantity of an item is deemed to be too low, the clerk
selects a vendor from the valid vendor file and prepares a digital purchase order. The clerk prints two
hard copies: one copy is sent to the vendor, and the other is filed in the purchasing department.
Digital purchase order record is added to the purchase order file.
When the goods arrive in the receiving department, the receiving clerk inspects them and reconciles
the items against the information in the digital purchase order and the packing slip. The clerk then
manually prepares two hard copies of the receiving reports. One of these accompanies the goods to
the inventory warehouse, where the clerks shelves the goods and updates the inventory subsidiary
ledger from his/her computer terminal. The clerk then files the receiving report in the department.
The other copy of the receiving report is sent to the accounts payable department, where the
accounts payable clerk files it until the supplier’s invoice arrives. When the accounts payable clerk
receives the invoice he pull the receiving report from the temporary file, prints a hard copy of the
digital purchase order, and reconciles the three documents. At this time, the clerk updates the digital
accounts payable subsidiary ledger, the accounts payable control account and the inventory control
account in the general ledger from his terminal. The clerk then sends the invoice, receiving report,
and the purchase order copy to the cash disbursement department.
Cash Disbursements System
Upon the receipt of the documents from the accounts payable department, the cash disbursements
clerk files the documents until their payment due date. On the due date, the clerk prepares a cheque
for the invoiced account, when is sent to the treasurer who sign it and mail the cheque to the vendor.
The cash disbursements clerk then updates the cheque register, accounts payable subsidiary ledger,
and the accounts payable control account from his/her computer terminal. Finally, the receiving clerk
files the invoice, purchase order copy, receiving report, and cheque copy in the department.
Payroll System
Bell Studio’s employees record their hours worked on time cards every day. Their supervisors review
the time cards for correctness and submit them to the payroll department at the end of each week.
Using a computer terminal connected to the central payroll system, which is located in the data
processing department, the payroll clerk inputs the time card data, prints hard copies of the pay
cheques, print two copies of the payroll register, and posts to digital employee records. The payroll
clerk files the time cards in the payroll department and sends the employee pay cheques to the
various supervisors for review and distribution to their respective department employees. The
payroll clerk then sends one copy of the payroll register to the accounts payable department, and
files the other with the time cards in the payroll department.
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HI5019 Strategic Information Systems for Business and Enterprise Individual Assignment
The accounts payable clerk reviews the payroll register and manually prepares a disbursement
voucher. The clerk sends the voucher and the payroll register to the general ledger department. The
accounts payable clerk then writes a cheque for the entire payroll and deposits it in the imprest
account at the bank. Finally the clerk files a copy of the cheque in the accounts payable department.
Once the general ledger clerk receives the voucher and payroll register, the clerk posts to the general
ledger from the department computer terminal and files the voucher and payroll register in the
department.
Required
Prepare a report to Chief Operating Officer to evaluate the processes, risks and internal controls for
its expenditure cycle. In your report, you need to include the following items:
Data flow diagram of purchases and cash disbursements systems
Data flow diagram of payroll system
System flowchart of purchases system
System flowchart of cash disbursements system
System flowchart of payroll system
Description of internal control weakness in each system and risks associated with the
identified weakness
Sample Solution
