Accounting Information System Individual Assignment

Lecturer: Mr. Andrey H. Pulungan

Marlon Novie Akay
ACC 2009_008200900047

Problem I _ Internal Control (pg. 206)

Analyze the internal control weaknesses in the system. Model your response according to
business control goals

The study case is about the revenue cycle of a grocery store owned by Robert Smith. The store is
a full range farmers’ market with a strong local customer base. The problem of this company is a
declining in profits and sale; meanwhile the purchases of the products for resale have continued
to rise. The company has commissioned an accounting firm to assess the company’s sales
procedures and sales. Then, the revenue cycle of the company can be seen from the data flow
diagram and flowchart. This type of store is using point of sale system (POS) that there is no
account receivable and the customer paid the goods by using cash, credit card or check.

The way to analyze the company’s internal control weaknesses is according to business process
control goals. There are two kinds of control goals: control goals of operations and control goals
of information processes. Control goals of the Operation Processes are useful to ensure
effectiveness of operations, the efficient employment of resources and the security of resources.
Then, the control goals of information process is using for business event inputs (ensure input
validity, completeness and accuracy) and for master data (update completeness and accuracy)

These are some weaknesses of the internal control system of Smith’s store with Control goals as
the model.

Control goals of operating Process

• Effectiveness of operation
The treasury clerk is the one who counts the cash and credit card sales, meanwhile he
also prepares the deposit slip and deliver the cash, credit card and check to the bank.
There might be a fraud that the cash receipts are not deposited on the day received.
 • Efficient employment of resources.
The problem has occurred when there is no assignment of clerks to specific register. The
four register are not dedicated to specific sales clerks because the clerks play many roles
in day –to-day operation.
• Security of resources
The treasury clerks should reconcile the amount of cash with the register tape; otherwise
he just counted the cash and credit card sales after the shift supervisor gave the register
drawers to him.

Control goals of Information process

• Input validity
The information of the actual sales input could be not supported by customer payment,
because the clerk in treasury department did not ensure the amount of the cash drawers
with the amount recorded in register tape.
• Input completeness
There might be an error of capturing the customer payments and entered into the system
by the sales clerk because there is no specific register clerk or the error by treasury clerk.
• Input accuracy
The sales clerk play many roles in the day operation, like checking out customers, stock
shelves, unload delivery trucks or even process the sale. There might be an error of the
accuracy of the goods sold by the sales clerk while processing the sale.
• Update completeness and accuracy
Since the problem of the sales clerk and treasury clerk exists, the input cash receipts
might be incorrectly recorded to the system.

There are several problems in this store related to its revenue cycle as shown above. The store
has four register, but there are no specific sales clerk to take care the sale register (cashier). Then,
there is no involvement like control the process of sale by the shift supervisor. At last, the
problem occurred I treasury department, because the treasury clerk is only count the cash and
credit card sales without reconcile them with the register tape and then, the clerk is also the one
who prepare the deposit slip and save it to the banks. However, these problems caused several
opportunities that error and also fraud might happen. There will be some errors on the registering
the sale by the sales clerk and since there is no sales’ reconciliation or even prepare the cash
reconciliation form, the shift supervisor or the treasury clerk can corrupt the money and check.

After knowing the weaknesses, there are several suggestions to fix these problems.

• The store manager has to find out the suspect of this problem of why the profit has
declined while the order of the products has increase. It could be the sales clerk or shift
supervisor or treasury clerk or maybe all of them.

Then, after knowing the suspects, the store may do the punishment and create a better
revenue cycle by considering the following:

• The store must have the specific sales clerk that taking cares the sales register.
• The shift supervisor should control the process of payment of the customers by the
specific sales clerks.
• The treasury clerk must reconcile the cash and credit card sales with the amount on the
register tape and after that prepare a cash reconciliation form and give one copy to the
sales clerk as a receipt for cash remitted.