AC 508 Company Study (CMI)
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Transcript of AC 508 Company Study (CMI)
A Company StudyPresented to the
Faculty of the Department of AccountancyUniversity of San CarlosCebu City, Philippines
_____________________________
In Partial Fulfillment of the requirements for the course
AC508: Accounting Information Systems_____________________________
March 14,2015
Sales Warehouse Sales and Marketing Department Accounting and Finance Department
Architectural Plan
Prepare contract
quotation
Contract Quotation
Signed Contract
Purchase Order
Request signature for Sales Order
Contract
Signed Sales Order Contract
Estimate of
products needed
Clear product available
Signed Contract Quotation
Prepare Sales Order
Contract
Sales Order Contract 1
Sales Order Contract 2
Sales Order Contract 3
Issue Sales Invoice
Sales Invoice
Input
Auto-entry to General Ledger
A
Customer
Customer
Product Specialist
Product Specialist
Sales and Marketing Officer
Inventory Control Staff
Quantity Engineer
Architectural Plan
Customer
Original Copy Sales Order Contract
Customer File
Folder
Accounting and Finance Officer
General Ledger
Accounting and Finance Officer
Confirmation of payment
SALES ORDER PROCESSING SYSTEM
Accounting and Finance Department Warehouse General LedgerSales
Coordinate for delivery
and schedule
for delivery
Inform Administration
officerProcess Pull-out Slip and Delivery
Slip
Pull-out Slip
Delivery SlipSummary of SOC
Summary of SI
Summary of PR
Summary of DS
Summary of POSSummary of
Inventory
Review
ACustomer
Product Specialist
Administration Officer
Accounting and Finance Officer
Prepare the
goods
Input
Auto-entry to General Ledger
Product Specialist
Warehouse-In-Charge
Deliver prepared
goods
Delivery Personnel
Customer
Delivery Slip
Stock Release
Stock Release
General Ledger
Administration Officer
Product Specialist
Confirms the status of the account of the
customer from the Accounting &
Finance Department
SALES ORDER PROCESSING SYSTEM
Deliver Goods
FINDINGS RECOMMENDATIONS
The Warehouse has no narrative of releasing the goods prepared by the Warehouse-In-Charge.
The Warehouse should give an update whenever there is a release of goods from the Warehouse-In-Charge because they need to record the goods prepared and given by the Warehouse-In-Charge so that they can match it with the actual goods received by the delivering personnel, so that they can avoid problems regarding the goods.
The Warehouse did not record the release of the goods in the stock records.
The Warehouse should maintain and update records for management purposes and should receive a stock release document from sales/receive order function because they need to make sure their personnel records the delivery of goods and they would not be held liable for any problems regarding the delivery and so that they will have a record of their current inventory.
Internal Control Existing Comment Recommendation
1. Transactions Authorization
The company does not have a credit check process to check the credit-worthiness of their customers.
The company should incorporate a credit check process to check the credits of their customers.
Internal Control Existing Comment Recommendation
2. Segregation of Duties
1. The transaction is separate from the transaction processing.
2. There is no clear narrative that separates the asset custody and asset record keeping.
3. There is no clear structure that
prevents perpetration of fraud.
The company should incorporate a credit check process to check the credits of their customers.
Internal Control Existing Comment Recommendation
3. Supervision None
They can keep this current way, but if their company continues to grow then they should employ someone to supervise the departments.
Internal Control Existing Comment Recommendation
4. Accounting Records
1. Their documents are already pre-numbered.
2. They have special journals which provides a concise record of the entire class of events.
3. They have subsidiary ledgers for checking the different accounts.
4. They have general ledger which contains all information needed to make a financial statement.
Their internal controls for accounting records is OK.
Internal Control Existing Comment Recommendation
5. Access
The Warehouse-In-Charge is in-charge of the warehouse inventory but has two people assisting him in the process, so there is a prevention of illegal and unauthorized access.
Their current system is OK.
Internal Control Existing Comment Recommendation
6. Independent Verification
1. There is no indication of checking of the goods before they are sent to the customer.
2. There is no indication of a billing function that reconciles the original sales to verify and ensure that the customer only pays for their order.
1. They should indicate in their narratives the checking of the goods before they are sent in and out of their warehouse.
2. They should indicate in their narratives of the reconciliation of the sales order and the actual goods that are sent to the customer.
Sales and Marketing Warehouse Accounting & Finance
Customer
Product specialist
Inspection of goods by clerk and
preparation of damage
report
Admin Officer
MRS 3Customer file folder
Declaration of MRS and preparation
of DCR
DCR 1 DCR 2
DCR 3
Managing Director DCR 2
Admin Officer
Input transaction
Cashier
Refund check
Informs if check is
ready for release
Refund check
Informs the customer of the refund
Refund check Auto-system
entry to GL
General Ledger
Damage Report
Warehouse-In-Charge
MRS 1
Check voucher
Damage Report 1
MRS
MRS 2
Damage Report 2
MRS 2
Damage Report 2
A AB
B
SALES RETURN PROCESSING SYSTEM
FINDINGS RECOMMENDATIONS
Warehouse-In-Charge is the one who inspects returned goods, approves the return, and at the same time prepares the MRS.
A Warehouse Clerk should be the one to receive, and to initially check the damages of the goods. He should prepare a damage report to be forwarded to the Warehouse-In-Charge. The Warehouse-In-Charge should reconcile this report with the actual damages of the goods 1-2 working days from receipt of the damage report. This control is needed since this is one problem the company is currently experiencing. A customer sometimes bribes or persuades the Warehouse-In-Charge into accepting and approving the refund for returned goods even though the goods do not qualify for such.
Internal Control Existing Comment Recommendation
1. Transactions Authorization
Approval of return and refund is based on the company’s policies and required qualifications
Effective
Internal Control Existing Comment Recommendation
2. Segregation of Duties
1.No separation of deciding authority between the receipt of goods and approval for return.
2.Preparation of refund check is separate from the release of the check.
1. Inspection of damaged goods shall be done by an employee other than the one who approves the return.
2. Effective
Internal Control Existing Comment Recommendation
3. Supervision
Admin Officer provides control over the entire process acting as a “middle man” (check, reconcile, approve, disapprove, etc.) of all documents and transactions.
Improved supervision is needed when the company continues to expand and hire more employees.
Internal Control Existing Comment Recommendation
4. Accounting Records
1. Computerized system
2. Slips, vouchers and other documents are released in copies.
Effective
Internal Control Existing Comment Recommendation
5. Access
As the “middle man”, Admin Officer has access to master file of all documents.
Sufficient and effective access controls.
Internal Control Existing Comment Recommendation
6. Independent Verification
1. Inspection of goods before approval for return and refund
2. Refund check reconciles with check voucher
Effective
Sales and Marketing Administration Department
Accounting & Finance
Customer
Bank
Preparation of DCR,
checks, SOD and DS
Managing Director
Admin Officer
Input transaction
Check
Auto-Entry
System
General Ledger
Cashier
Product Specialist
Check
Issuance of PR
PR
Product specialist
Customer
Checks
DS
SOD
DCR 1
DCR 2
DCR 3
Validated DS
Validated DS
DCR 2
QC
SOC
PR
CashAccounts
Receivable
CASH RECEIPTS PROCESSING SYSTEM
PRSI
FINDINGS RECOMMENDATIONS
The Admin receives all the checks, prepares the deposit slips, issues the PR, prepares the daily collection report and prepares the summary of deposits.
There should be strict supervision applied by the Admin Officer and segregation of duties to avoid potential employee fraud and to boost employee performance.
Internal Control Existing Comment Recommendation
1. Transactions Authorization
The company policies, like cash before delivery and check clearance before installation provide adequate internal control.
The company policies must be strictly implemented
Internal Control Existing Comment Recommendation
2. Segregation of Duties
There is inadequate separation of duties because there is a relatively fewer number of employees.
Closer supervision is recommended.
Internal Control Existing Comment Recommendation
3. Supervision
Admin Officer provides control over the entire process acting as a “middle man” (check, reconcile, approve, disapprove, etc.) of all documents and transactions.
Improved supervision is needed when the company continues to expand and hire more employees.
Internal Control Existing Comment Recommendation
4. Accounting Records
There is adequate amount and quality of documents to support the audit trail for the system.
Effective
Internal Control Existing Comment Recommendation
5. AccessThere is sufficient amount of access control to prevent and detect unauthorized access to records.
Effective
Internal Control Existing Comment Recommendation
6. Independent Verification
Cash receipt, general ledger and bank reconciliation functions are sufficiently verified independently to allow effective detection of irregularities.
Effective