OUTDOOR ADVENTURE: WHITE WATER AND CAMPING SUPPLIES(NETWORKED COMPUTER SYSTEM AND MANUAL PROCEDURES)Outdoor Adventure is a Montana-based wholesaler of rafting andcamping equipment that serves outdoor sports camping retailers throughout the northwest. You have been hired by Outdoor Adventure toevaluate its processes, risks, and internal controls. The followingparagraphs describe Outdoor Adventure's expenditure cycle procedures.Purchases System The process begins when the purchasing clerk checks the inventorysubsidiary ledger on his computer terminal each morning. When anitem is deemed to be too low, the clerk selects a vendor from the validvendor 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 thedepartment. Digital purchase order record is added to the PO File.When the goods arrive in the receiving department, the receiving clerkinspects them and reconciles the items against the information in thedigital PO and the packing slip. The clerk then manually prepares twohard copies of the receiving report. One of these accompanies the goods to the inventory warehouse, where the clerk shelves the goods andupdates the inventory subsidiary ledger from his terminal. The clerkthen files the receiving report in the department. The other copy of thereceiving report is sent to the AP department, where the AP clerk files ituntil the supplier's invoice arrives. When the AP clerk receives the invoice, he pulls the receiving report from the temporary file, prints ahard copy of the digital PO, and reconciles the three documents. At thistime, the clerk updates the digital AP subsidiary ledger, the AP controlaccount, and the inventory control account in the GL from his terminal.The clerk then sends the invoice, receiving report, and the purchaseorder copy to the cash disbursements department. Cash Disbursements SystemUpon receipt of the documents from the AP department, the cashdisbursements clerk files the documents until their payment due date.On the due date, the clerk prepares a check for the invoiced amount,which is sent to the treasurer who signs it and mails the check to thevendor. The cash disbursement clerk then updates the check register, APsubsidiary ledger, and the AP control account from his terminal. Finally,the clerk files the invoice, purchase order copy, receiving report, andcheck copy in the department. Required a. Create a data flow diagram of the current system.b. Create a system flowchart of the existing system.c. Describe internal control weaknesses in the system and discussthe risks associated with these weaknesses. d. (Optional) Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses that youidentified. Explain your solution.
OUTDOOR ADVENTURE: WHITE WATER AND CAMPING SUPPLIES
(NETWORKED COMPUTER SYSTEM AND MANUAL PROCEDURES)
Outdoor Adventure is a Montana-based wholesaler of rafting and
camping equipment that serves outdoor sports camping retailers
throughout the northwest. You have been hired by Outdoor Adventure to
evaluate its processes, risks, and internal controls. The following
paragraphs describe Outdoor Adventure's expenditure cycle procedures.
Purchases System
The process begins when the purchasing clerk checks the inventory
subsidiary ledger on his computer terminal each morning. When 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
department. Digital purchase order record is added to the PO File.
When the goods arrive in the receiving department, the receiving clerk
inspects them and reconciles the items against the information in the
digital PO and the packing slip. The clerk then manually prepares two
hard copies of the receiving report. One of these accompanies the goods
to the inventory warehouse, where the clerk shelves the goods and
updates the inventory subsidiary ledger from his terminal. The clerk
then files the receiving report in the department. The other copy of the
receiving report is sent to the AP department, where the AP clerk files it
until the supplier's invoice arrives. When the AP clerk receives the
invoice, he pulls the receiving report from the temporary file, prints a
hard copy of the digital PO, and reconciles the three documents. At this
time, the clerk updates the digital AP subsidiary ledger, the AP control
account, and the inventory control account in the GL from his terminal.
The clerk then sends the invoice, receiving report, and the purchase
order copy to the cash disbursements department.
Cash Disbursements System
Upon receipt of the documents from the AP department, the cash
disbursements clerk files the documents until their payment due date.
On the due date, the clerk prepares a check for the invoiced amount,
which is sent to the treasurer who signs it and mails the check to the
vendor.
The cash disbursement clerk then updates the check register, AP
subsidiary ledger, and the AP control account from his terminal. Finally,
the clerk files the invoice, purchase order copy, receiving report, and
check copy in the department.
Required
a. Create a data flow diagram of the current system.
b. Create a system flowchart of the existing system.
c. Describe internal control weaknesses in the system and discuss
the risks associated with these weaknesses.
d. (Optional) Prepare a system flowchart of a redesigned computer-
based system that resolves the control weaknesses that you
identified. Explain your solution.
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