HI5019 Analysing an Accounting Information System Assessment Solutions
Assignment Detail:-
- Number of Words: 2000
ASSIGNMENT DETAILS
The first four interactive tutorials of the Strategic Information System for Business and Enterprise HI5019 T1 2022 provide sufficient background knowledge to understand accounting information systems and analyse the revenue cycle of a company. Based on a strict assumption, this knowledge enables you to start an accounting consultancy. You are passionate to provide consultancy services in this area. To pursue your passions, you started your consultancy services.
Luckily, you got your first client, Mrs Maria, head of the RCIATO Limited.1 Mrs Maria approached you to evaluate their revenue cycle. At the end of the initial meeting, you requested Mrs Maria to provide you with the details of the sales order processing procedures (SOPP) and (2) cash receipts procedures (CRP). Here it might be essential to note that the revenue cycle can be broadly categorised into SOPP and CRP. For this assessment purpose, we will use the terms type one procedures and type two procedures to reveal the sales order processing procedures and cash receipts procedures, respectively.2 The description of the type one procedures and type two procedures are given below.
Type One Procedures of RCIATO Limited
The sales department encourages its customers to forward the orders in any form, including mail, e- mail or fax. The sales clerk first converts these sales orders into standardised sales orders. For this purpose, the sales representative requests the missing information, if any.3 When the order is received, the sales clerk checks the customer’s creditworthiness from his computer terminal. The sales clerk thinks that checking the accounting record is not technical, and he can perform these duties efficiently.
Two years ago, the sales clerk requested the accounting department provide him with a list of customers whose account receivables are written off. The sales clerk is still using this information to check the customers’ creditworthiness. The sales clerk did not differentiate the new customers from the existing customers, and he is using the same procedure to check the creditworthiness of the new customers. The customer’s order is rejected if the customer’s credit is not verified.
The sales order processing is started after the credit verification. In particular, the sales clerk records the approved standardised sales order in the sales order system through his computer terminal. A digital copy of the order is distributed to the warehouse and the shipping department terminals for further processing. The computer system automatically records the sale in the sales journal. The clerk files the hard copy of the customer order in the sales department without reviewing the entry. Then, the receipt of the digital sales order prompts on the computer terminal of the warehouse manager. This digital sales order has the associated stock release and the shipping notice.
As discussed in our interactive tutorials, these documents play an essential role in the transaction processing system. The warehouse manager has access to these documents. The warehouse manager prints out the sales order, the stock release, and the shipping notice and use these hard copies for further processing. Using the stock release copy, a warehouse clerk picks the selected items from the shelves and sends them to the shipping department along with the stock release and the shipping notice. The warehouse manager then updates the inventory subsidiary ledger and the general ledger control account from his computer terminal.
The shipping clerk receives the physical stock, the stock release, and the shipping notice from the warehouse manager. The shipping clerk matches them to the corresponding digital sales order displayed on his terminal. If everything matches, he prints out three hard copies of the bill of lading and a packing slip. The shipping clerk sends two copies of the bill of lading and the packing slip, along with the goods, to the carrier. The stock release copy and the shipping notice are sent to the accounts receivable department.
These documents play an essential role in the efficient management of the account receivable. The third bill of lading copy is filed in the shipping department for record-keeping and audit purposes. The account receivable clerk receives the stock release and shipping notice from the shipping clerk. Then, the accounts receivable clerk manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice, the clerk uses information on the stock release to update the accounts receivable subsidiary ledger and general ledger from his computer terminal. After the records are updated, the clerk files the stock release and shipping notice in the accounts receivable department. Sometimes, the account receivable clerk reconciles the quantities from the sales order and adjusts the account receivables.
Type Two Procedures of RCIATO Limited
Customers’ payments come directly to the general mailroom along with other mail items. The mail clerk performs the different tasks, including (1) sorting the mail, (2) opening the customer payment envelope, (3) removing the customer’s check and remittance advice, and (4) reconciling these two documents. The clerk manually prepares two hard copies of a remittance list to control the checks and remittance advice. He sends one copy to the accounts receivable department and the corresponding remittance advice. The other copy of the remittance list accompanies the checks to the cash receipts department.
Once the checks and remittance list arrive in the cash receipts department, the treasurer performs the following tasks: (1) reconciles the documents, (2) endorses the checks, (3) manually prepares three hard copies of a deposit slip, (4) updates the cash receipts journal and the general ledger from his computer terminal, (5) sends the checks, and two copies of the deposit slip to the bank, and (6) files the third copy of the deposit slip and the remittance in the department.
The accounts receivable clerk receives the remittance list and remittance advice from the mailroom and reconciles these two documents. He then updates the accounts receivable subsidiary ledger and the general ledger. Then, the account receivable files the two documents in the department.
Required
Based on the above information, prepare a report for the head of the accounting department of RCIATO Limited to evaluate their revenue cycle. In your report, you need to include the following items:
- “Establishing separate departments for warehousing, shipping and inventory control will enhance internal controls over the ” Discuss this statement in the light of the existing revenue cycle of RCIATO Limited.
- In the light of our discussion during interactive tutorials, describe potential internal control weaknesses in the sales order processing procedures and cash receipts procedures of RCIATO
- In the light of our discussion during interactive tutorials, discuss the potential risks associated with the internal control weaknesses identified in Section (2) above.
- Based on Section (3) above, what types are frauds are possible. Hint: we have discussed different types of frauds in the interactive tutorial and Your discussion should be based on these contents.
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