RISK ANALYSIS AND INTERNAL CONTROL The following describes the purchases and cash disbursements procedures for a lawn and garden supply wholesaler that uses a central computer system with distributed terminals in departments. The inventory control clerk visually reviews inventory levels from his computer terminal to identify items that need to be ordered. He then prints and sends a hard copy purchase requisition for the needed items to the purchasing agent. Based on the requisition, the purchasing agent selects a vendor and adds a digital record to the purchase order file from his terminal in the purchasing department. The clerk then prints a hard copy of the purchase order and mails it to the vendor. Finally, the purchasing agent destroys the purchase requisition, which it is no longer needed since the relevant details are on the PO. When the materials arrive at the receiving department a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the packing slip. The clerk then manually creates a two-part hard copy receiving report. One copy of the receiving report is sent to Inventory Control and the other is sent to the purchasing department. The packing slip is sent with inventory to the warehouse. When the purchasing agent receives the receiving report, he closes the digital PO record and adds a record to the digital receiving report file. He then destroys the hard copy receiving report, which is no longer needed. Upon receipt of receiving report copy, the inventory control clerk updates the inventory subsidiary ledger to record the receipt. The clerk then destroys the hard copy receiving report. Vendors send hard copy invoices to the AP clerk for processing. When the clerk receives an invoice, she reconciles it with the digital purchase order and receiving report. She then selects a due date and adds a record to the Vendor Invoice file, which serves the AP Subsidiary ledger. The clerk then files the invoice in the department. On the due date the computer system automatically prints a check, mails it to the vendor, closes the Vendor Invoice record to discharge the liability, and records the payment in the Cash Disbursement file. Required a. Create a system flowchart of the system.
RISK ANALYSIS AND INTERNAL CONTROL
The following describes the purchases and cash disbursements procedures for a lawn and garden supply wholesaler that uses a central computer system with distributed terminals in departments.
The inventory control clerk visually reviews inventory levels from his computer terminal to identify items that need to be ordered. He then prints and sends a hard copy purchase requisition for the needed items to the purchasing agent. Based on the requisition, the purchasing agent selects a vendor and adds a digital record to the purchase order file from his terminal in the purchasing department. The clerk then prints a hard copy of the purchase order and mails it to the vendor. Finally, the purchasing agent destroys the purchase requisition, which it is no longer needed since the relevant details are on the PO.
When the materials arrive at the receiving department a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the packing slip. The clerk then manually creates a two-part hard copy receiving report. One copy of the receiving report is sent to Inventory Control and the other is sent to the purchasing department. The packing slip is sent with inventory to the warehouse.
When the purchasing agent receives the receiving report, he closes the digital PO record and adds a record to the digital receiving report file. He then destroys the hard copy receiving report, which is no longer needed.
Upon receipt of receiving report copy, the inventory control clerk updates the inventory subsidiary ledger to record the receipt. The clerk then destroys the hard copy receiving report.
Vendors send hard copy invoices to the AP clerk for processing. When the clerk receives an invoice, she reconciles it with the digital purchase order and receiving report. She then selects a due date and adds a record to the Vendor Invoice file, which serves the AP Subsidiary ledger. The clerk then files the invoice in the department.
On the due date the computer system automatically prints a check, mails it to the vendor, closes the Vendor Invoice record to discharge the liability, and records the payment in the Cash Disbursement file.
Required
a. Create a system flowchart of the system.
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