ENTRALIZED SYSTEM WITH DISTRIBUTED TERMINALS) Performance Water Pumps (PWP) is a leading man- ufacturer of water pumps with high capacity capabil- ity. These pumps are used in both civil and private disaster situations. PWP's primary market is disaster recovery companies that assist home owners follow- ing basement flooding. They also sell to building contractors, municipalities, and rental companies. The company publishes an industry catalog o
PERFORMANCE WATER PUMPS
(CENTRALIZED SYSTEM WITH
DISTRIBUTED TERMINALS)
Performance Water Pumps (PWP) is a leading man-
ufacturer of water pumps with high capacity capabil-
ity. These pumps are used in both civil and private
disaster situations. PWP's primary market is disaster
recovery companies that assist home owners follow-
ing basement flooding. They also sell to building
contractors, municipalities, and rental companies.
The company publishes an industry catalog of
pumps and other auxiliary equipment, which it dis-
tributes to customers and prospective customers.
PWP's headquarters and manufacturing facilities
are in Leesville, Louisiana where they employ 125
manufacturing and clerical staff.
PWP employs a centralized computer system with
distributed terminals in the departments. Recently
they have been having operational problems with
- PWP has hired your auditing firm to assess its
operations and internal control procedures.
Purchasing System
When an inventory item falls to the reorder point, a
purchase requisition is automatically created and
printed on the terminal in the purchasing depart-
ment. The clerk in the department selects suppliers
and prepares a purchase order. A copy of the PO is
sent to the vendor, and a copy is sent to the receiving
department. Then, the clerk adds a record to the
open/closed purchase order file through an update
program in the data processing department.
When the receiving clerk receives the inventories,
he reconciles the goods with the packing slip and the
purchase order. After the reconciliation, the receiv-
ing clerk prepares a hard-copy receiving report
recording the quantity and quality of the goods
received. A copy of the receiving report accompanies
the goods to the warehouse, and a copy is filed in the
receiving department. Using the department termi-
nal, the receiving clerk adds a record to the digital
receiving report file. The system then automatically
closes the purchase order. Upon receiving the inven-
tories, the warehouse clerk updates the inventory
subsidiary ledger through the terminal in the
warehouse.
When the supplier's invoice arrives, the accounts
payable clerk adds a record to the supplier invoice
file, which triggers the system to automatically set
up a liability in the AP subsidiary ledger based on
the financial information contained in the invoice.
The system then automatically updates all affected
general ledger accounts.
Cash Disbursements System
Each day the system scans the AP ledger for items
due to be paid and prints the checks. The check is
sent to the vendor, and a copy is sent to cash disbur-
sements, where it is filed. Next, the system adds a
record to the check register file and removes the lia-
bility in the AP subsidiary ledger. Finally, the system
automatically updates the general ledger accounts.
Required
a. Create a data flow diagram of the current system.
b. Create a system flowchart of the existing system.
c. Analyze the physical internal control weaknesses
in the system.
d. Describe the IT controls that should be in place in
this system.
- (Optional) Prepare a system flowchart of a rede-
signed computer-based system that resolves the
control weaknesses that you identified. Explain
your solution.
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