Accounting Information System

The report provides an analysis of the control weaknesses in the accounting information system at Platinum Manufacturing Group and recommends suitable measures to mitigate them. The benefits of IT have also been recommended to be utilized in order to solve these control issues and deliver a much better and more efficient operational service to the company.

Running Head: ACCOUNTING INFORMATION SYSTEM
Accounting Information System
Name of the Student
Name of the University

1ACCOUNTING INFORMATION SYSTEM
Executive Summary
The development of information systems benefits mostly the business organizations who rely on
manual work for the operational processes. The information systems are faster, more accurate
and much more efficient that manual labor. In this report, the case of Platinum Manufacturing
Group has been considered and the implementation of information system in the accounting
operations of the organization has been discussed.

2ACCOUNTING INFORMATION SYSTEM
Table of Contents
1.0 Introduction................................................................................................................................3
2.0 Overview of the Expenditure Process........................................................................................3
3.0 Data Flow Diagram....................................................................................................................4
4.0 Identification of Various Aspects of the System.......................................................................5
5.0 Conclusion.................................................................................................................................8
Bibliography..................................................................................................................................10

3ACCOUNTING INFORMATION SYSTEM
1.0 Introduction
Platinum Manufacturing Group is a company that deals with the manufacture of various
electrical goods. The operations effectively require purchase and storing of various high value
raw materials that are to be used for the manufacture of the goods. Hence, the company has
deployed a number of specific activities that are followed to ensure running of the entire system.
The activities include verification of items received from seller, storing the items in the
storeroom, auditing the inventory at the end of each month, provide order to seller to buy items
and others. However, there are some issues that may result in serious consequences for the
operations of the company.
In this report, an analysis has been conducted on the control weaknesses of the company
and suitable recommendations have also been provided.
2.0 Overview of the Expenditure Process
The overall expenditure process at the organization is mainly based on several systematic
activities like purchase, receipt, storage and issuance of raw materials by specific personnel
assigned. For the purpose of raw materials purchase, a purchasing team has been assigned who
sends the orders, receives the purchase slip once an order is delivered to the company. Based on
the invoice, the purchasing team makes all the payments on due date and keeps record that is
being audited at the end of each month. The receipt is provided along with the delivery of the
order and the storeroom staffs check the receipt with the amount of items delivered before
sending the items to the storeroom. Upon receiving oral or written authorization from the
production supervisor, raw materials are dispatched from the storeroom.

4ACCOUNTING INFORMATION SYSTEM
3.0 Data Flow Diagram
The data flow diagram for the system is shown as follows.
Figure 1: Level 0 Data Flow Diagram
(Source: Created by Author)

5ACCOUNTING INFORMATION SYSTEM
4.0 Identification of Various Aspects of the System
The various aspects of the system are identified and listed in the following table.
Internal Control
Weakness
Impact of the
weakness
Control to mitigate the
weakness
Latest IT
developments
The main weakness of
the internal control is
that the processes are
initiated at even oral
instructions or
authorizations. In this
case, breach of security
is possible as any
unauthorized personnel
can provide oral
authorizations by acting
as an internal
stakeholder or staff.
Unauthorized access to
the inventory may result
in stealing of valuable
items and materials that
will ultimately lead to
the financial loss of the
company. Moreover,
loss of materials from
the inventory will also
lead to loss of
significant amount of
time as the purchase
process will have to be
repeated.
The main control that
can be implemented to
mitigate the weakness
includes the approval
process through written
and signed documents
only instead of oral
authorization. There can
be an authorization form
that must be filled up by
the production
supervisor before
sending them to the
storeroom staffs for
authorization of raw
materials extraction.
Latest IT developments
can further simplify the
process with added
security measures.
Instead of paper
authorization forms, the
process can be executed
online through digital
document and signature.
This is much more
easier for verification of
identity and
consideration of
authorization based on
the digital signature
provided.
The access to the
storeroom requires a
password to be entered.
This password is only
provided to the
The main impact of the
weakness is that the
room becomes easily
accessible by anyone
once the password is
This weakness can be
mitigated with enforcing
better and stronger
security measures. The
password system can be
Latest IT developments
provide effective facial
recognition system and
biometric fingerprint
checking system at very

6ACCOUNTING INFORMATION SYSTEM
storeroom staffs and the
storeroom supervisor.
However, the weakness
with this system is that
the password can be
leaked easily and
anyone can access the
room once he knows the
password.
leaked and hence, the
security of the room is
not sufficient.
Unauthorized access can
lead to stealing of
valuable raw materials
from the inventory.
replaced by biometric
identification system or
facial recognition
system that will allow
access to only specific
personnel. This process
is much more efficient
that the password
process as the finger
prints and facial features
are unique to everyone
and cannot be stolen by
any unauthorized
personnel.
low prices without
having to face any
major technical
problems. Hence, it will
be easy for the company
to deploy such systems
in order to enforce
security of the
storeroom.
The entire delivery
process including
dispatching of packing
slip, counting of the
amount of products
delivered and updating
of the inventory is done
manually. This manual
process leads to several
errors and in many
instances, the amount of
the materials counted by
The impact with this
weakness is that it can
lead to numerous
manual errors including
wrong counting of
materials, wrong update
in the inventory and
others. Moreover, the
process is very slow and
leads to various
problems like delay in
operations for the
This process can be
digitalized and
computerized as well
resulting in faster, more
efficient and more
accurate outcome. The
digital process means
the materials will be
counted by the
computer itself and
based on the total count,
the inventory will be
With the help of IT,
various technologies
like bar code reader, QR
code reader and others
can be implemented.
The sellers will be asked
to provide a bar code to
each of the product and
the storeroom staff will
be able to scan the
codes using the bar code
reader. Based on each

7ACCOUNTING INFORMATION SYSTEM
the storeroom staff was
found out to be wrong.
company. automatically updated. scan, the product can be
counted as well as the
inventory will be
updated simultaneously.
One major control
problem for the
organization is the lack
of perpetual inventory
system. The storeroom
staffs do not have to
keep track of the
inventory at any time of
the month. At the end of
each month, an overall
inventory audit is done
in order to determine
how many raw materials
are left.
The main issue that
occurs with the lack of
perpetual inventory
system is that the
company is unable to
keep track of the
materials that are being
kept in the storeroom. In
cases of stealing of
materials from the
room, the company will
never be able to keep
track of the amount of
materials stolen.
The best possible option
to control this weakness
is to deploy a perpetual
inventory system that
will keep daily track of
the materials available
in the storeroom. In
addition to the control
measure listed above, it
can sufficiently solve
the organization’s
problems regarding
keeping track of the
materials.
The inventory process
can be integrated with
the bar code reading
system as mentioned
above. In this system, as
the product is counted
by the system using the
scanned bar code, the
inventory will update
itself to add to the
scanned product into it.
This process will not
require monthly audits
as the track will be kept
daily.
For the purchase
process of raw
materials, the general
convention followed in
the company is that
once the purchasing
team receives a material
The main effect of this
issue is that once a
seller is fixed and used
for a long time, the
seller starts delivering
poor quality materials at
high prices. This is
The recommended
measure is to change
seller as frequently as
possible in order to
ensure the sellers
provide the best quality
products and the best
There are various
business analytics tools
that can help the
company to determine
the best possible prices
for the raw materials
that they want to

8ACCOUNTING INFORMATION SYSTEM
requisition form, the
team checks the list and
forwards to the order to
the seller that was used
for the last purchase as
well. This system
effectively means the
company continues to
buy materials from one
or two specific sellers
irrespective of the price
and quality of the
materials delivered.
harmful for the
company and hence, this
system must be stopped.
Once the seller is
ensured that they will
continue to receive the
orders from the
company, they will
eventually look to gain
more from the deal and
hence, will provide poor
quality materials at
higher prices.
price of products is
agreed. With the change
of seller, the company
should also appoint and
analysis team who will
analyze the current
market prices of the
materials before
agreeing on a suitable
price.
purchase from the seller.
Moreover, the IT tools
can be used to
determine the
backgrounds of various
sellers who are then
chosen for purchasing
specific raw materials.
5.0 Conclusion
In this report, an overall idea has been provided on the current operational system of
Platinum Manufacturing Group. The current operational system of the company includes
storeroom management, management of ordered materials, purchasing process, inventory
management and others. However, from the analysis, it has been determined that there are a
number of control issues that result in various problems for the company. The seriousness of
these control issues calls for the implementation of suitable measures that have been analyzed
and listed in this report. The benefits of IT has also been recommended to be utilized in order to

9ACCOUNTING INFORMATION SYSTEM
solve these control issues and deliver a much better and more efficient operational service to the
company.

10ACCOUNTING INFORMATION SYSTEM
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