Strategic Information Systems for Business and Enterprise

This study material provides an in-depth analysis of strategic information systems for business and enterprise. It covers system description, data flow diagrams, system flowcharts, internal control weaknesses, and associated risks. The content also includes a discussion on the purchases and cash disbursement systems, payroll system, and internal control weaknesses in each subsystem. The study material is suitable for students studying strategic information systems in business and enterprise. Course code: [Course Code], Course name: [Course Name], College/University: [College/University]

Bell Studio Systems 1
STRATEGIC INFORMATION SYSTEMS FOR BUSINESS AND ENTERPRISE
By [Name] [Number]
Course
Name of Course Professor
University
Location of University
Date of Submission

Bell Studio Systems 2
Contents
1.0. Introduction...............................................................................................................................2
2.0. System Description....................................................................................................................3
2.1. Data Flow Diagrams...............................................................................................................3
2.1.1. Purchases and Cash Disbursement Systems..................................................................3
2.1.2. Payroll System....................................................................................................................5
2.2. System Flowchart..................................................................................................................6
2.2.1. Purchases System..........................................................................................................6
2.2.2. Cash Disbursement System............................................................................................8
2.2.3. Payroll System Flowchart...............................................................................................8
3.0. Internal Control.........................................................................................................................9
3.1. Purchases System................................................................................................................10
3.1.1. Authorization...............................................................................................................10
3.1.2. Procurement process...................................................................................................10
3.1.3. Assignment of tasks.....................................................................................................11
3.2. Cash Disbursement System..................................................................................................11
3.2.1. Lack of oversight..........................................................................................................11
3.2.2. Lack of Payment Review process.................................................................................11
3.3. Payroll System.....................................................................................................................11
3.3.1. Manual data input.......................................................................................................12

Bell Studio Systems 3
Executive Summary
Bell Studio, an Adelaide art wholesaler hired an analyst to assist in analyzing the
various transaction cycles, financial reporting, and management reporting of its enterprise
system. Consequently, the system was divided into various subsystems that interact with
each other. These subsystems were the purchasing modules, cash disbursement, and payroll
modules. Each was represented using data flow diagrams and system flowcharts. After this
undertaking, each was analyzed for various internal control weaknesses. As a result, several
weaknesses were discovered in each of the subsystem. For this reason, the risk associated
with each internal control weakness was described. Weaknesses found include the lack of
properly defined procurement process, lack of managerial oversight and authorization, lack of
user authentication and lack of transaction monitoring process.
1.0. Introduction
Enterprise resource planning systems enable businesses to integrate various resources
and business processes towards achievement of the company’s goals. This helps address
various business concerns than cannot be addressed by other types of information systems
(Alrawashdeh, Muhairat and Qatawneh, 2014). This leads to cost reductions in operations
and ability to respond to users needs. However, due to uniqueness of each business’
processes, there is no one standardized model of implementing business information systems.
Therefore, analysis of each system becomes crucial in determining whether the system works
as expected. Additionally, it becomes imperative to determine whether the system exposes
the company to any risks associated with dependence on such a system. For this reason, this
report analyzes the Bell Studio Inc. information management system. This process will
include a discussion of various internal control weaknesses and their associated risk
implications to the company.

Bell Studio Systems 4
2.0. System Description
System analysts use various methods in describing computer information systems.
However, Data Flow diagrams and System flowcharts are commonly used to describe
computer systems. A data flow diagram (DFD) is a diagrammatic representation of the flow
of various processes and data across the system (Dobesova, 2014). This provides a visual
understanding of the system (Yakubu et al., 2011). Similarly, system flowchart is a visual
representation of the data flow in the system and hence the system process model (Ibrahim
and Yen, 2010). The main difference is that the system flowchart focuses on the flow control
and execution sequence of the process while DFDs focus on flow of data.
2.1. Data Flow Diagrams
2.1.1. Purchases and Cash Disbursement Systems
Purchasing systems are crucial in managing inventory and monitoring of stock. This
assists companies in understanding what to buy, when and from whom. Cash disbursement
system enables companies to handle payments effectively. The two systems are closely
related since the purchasing system depends on the latter to settle payments for goods
acquired. Similarly, the cash disbursement depends on the purchasing system to determine
what needs to be paid for and the amount. The two systems form a subsystem that can be
accurately represented using data flow diagrams. Data involved in this subsystem include
vendors, purchase orders, receiving reports, accounts payables, and inventory lists

Supplier Info.
Inventory info.
Creditor
Stock
Amount
Receiving Report File
Inventory
Monitorin
g
Inventory File
Supplier
Selection
Purchase
Order
generatio
n
Purchasing
Clerk
Vendor
Receiving
Clerk Prepare
Receiving
Report
Stores
Clerk Update
Inventor
y
Accounts
Payable Clerk
Generate
Purchasing
order
Update Account
Payable
Update
General
Ledger
Cash
Disbursement
Clerk
Generate Check
Update Check
Register
Items, supplier
information, terms
Purchase Order Copy
PO, Packing Slip
Invoice
Receiving Report
Inventory File
PO, Receiving Report,
Invoice
Invoice, PO, RR
PO, RR, Invoice
Creditors File
Suppliers File
Purchase Order Copy
PO File
Requisition
Receiving Report
Receiving Report
Invoice, RR
Update A/C
Payable
Cheque
Info
Cheque Info
PO, RR, Invoice
Goods info.
Bell Studio Systems 5
Check Register File

Payment Register
Payroll
Clerk
Time Card data
Entry
Time Card File
Update
Employees
records
Employee File
Process
Disbursement
voucher
Accounts
Payable
Clerk
General
Ledger
Clerk
Update
general Ledger
General Ledger file
Time Card,
Payroll
Register
Payment
Register
Disbursement
voucher
Hours worked
Payment Register
Salary expense
Work Data
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Figure 1. Purchases and cash disbursement flow of data
2.1.2. Payroll System
The Bell Studio Payroll system enables the company to make accurate and timely
payments for its employees. Various operations include the input of time card data,
generating payment registers, processing disbursement vouchers and updating the general
ledger which is associated with general expenses such as payment of employees salaries. The
data flow diagram show below helps describe this process.
2.2. System Flowchart
2.2.1. Purchases System
Purchases system flowchart describes the execution path of acquisition of stock
within Bell Studio. The purchases system deals with various activities that aid in ordering,
receiving and paying of goods. These activities include other internal processes such as
selection of vendors, inspection of goods, and reconciliation of purchase orders (PO) with
Figure 2. Payroll system

A
Monitor
Inventory Levels
Valid Vendors
File
Select Vendor
Prepare
Purchasing
Order (PO)Purchasing
order
Purchase
Order Files
B
Packing slip
Prepare
Receiving
Report
Receiving
Report
Update Inventory
Ledger
Inventory
Ledger file
Reconcile
packing slip
and PO
File
Bell Studio Systems 7
packing slips provided by vendors. Further, down the path, generation of receiving report and
updating the inventory ledger takes place. The diagram below helps represent this process.
Figure 3. Purchase System Process

A
Process Check
PO
Invoice
Receiving
Report
Update Check
Register
Check
Register File
Update Account
Payable
Cash Payable
Ledger File
File
Bell Studio Systems 8
2.2.2. Cash Disbursement System
The cash disbursement system allows the company to make payments for goods received or
services rendered. Therefore understanding the working of the system is crucial. The following
diagram shows the cash disbursement flowchart.
Figure 4. Cash Disbursement Process
2.2.3. Payroll System Flowchart
The Bell Studio payroll system enables companies to calculate employees earnings
based on hours worked. Description of the system using flowchart enable use to understand

A
Input Hours Worked
Employees
Records
B
Prepare
Disbursement
Voucher
Update General
Ledger
General
Ledger File
File
Payroll
Registers
Bell Studio Systems 9
the process of handling employees’ remuneration within the company. The following system
flowchart enables us to understand the payroll system for Bell Studio Inc.
Figure 5. Payroll system process
3.0. Internal Control Weaknesses and Associated Risks
Internal control are the systematic processes that exists within a company to ensure
effectiveness and reliability of operations. These processes exist to prevent the occurrence of
events that may jeopardize the integrity of the company’s finances. For this reason, the
computer systems used are supposed to ensure this rules are observed. Closer analysis of the

Bell Studio Systems 10
Bell studio system reveals that there exists various internal control weaknesses in various
subsystems.
3.1. Purchases System
Purchases and disbursement subsystem exhibits various weaknesses that pose threats
to the system.
3.1.1. Lack of Authorization
The purchases system lacks a means of authorizing the purchase clerk’s activities. For
this reason, the purchase orders created by the purchasing clerk are able to advance to the
next step without being authorized by the department’s manager or supervisor. The clerk is
able to create purchase orders and print them immediately.
The lack of authorization exposes the system to the possibility of creation of
unnecessary orders. Additionally, this puts the company at the risk of acquiring goods not
related to the operations of the company. In order to control this behavior, the company
should implement the system such that all orders created by the purchases clerk undergo
through an approval process by the manager. This can be achieved by having the manager log
in to the system and manually approve the orders before the clerk is allowed to print them.
3.1.2. Lack of a Defined Procurement process
The purchases system lack clearly defined procurement process. This leads to the
situation where orders are placed without checking the prevailing prices of goods. The
purchasing clerk checks the goods and places an order without investigating the prices of
good being procured. Additionally, the suppliers are not vetted on their ability to deliver the
particular goods in required form at the current moment.
Lack of a defined procurement process exposes the company to the risk of
exaggeration of prices of goods. This would lead to the company paying higher for prices of
goods. In addition, the company would fail to take advantage of offers and mass discounts
that are available during purchases. This would lead to the company losing money

Bell Studio Systems 11
unnecessarily. The recommendation for this problem is that the purchases clerk should only
deal with identifying the goods that require to be acquired and then another person carries on
with the process. The person charged with this process should be able to check prices and
discounts available. The current system has an order placed before a procurement process is
carried out. Placing an order before procurement is a major contributor to purchases fraud
(Murray, 2014). This exposes the company to potential of fraud through collusion involving
the purchasing clerk and suppliers.
3.1.3. Poor Assignment of Tasks
In the procurement process, the purchases officer is responsible of making orders and
selecting suppliers. The purchasing officer has the power to determine which goods are to be
bought. Similarly, the purchasing officer has the power to determine which supplier delivers
the goods. This gives him or her direct control in the complete purchasing process.
Having one person execute more than one task related to supply of goods creates a
room for fraud. This is because suppliers could influence purchasing officer into selecting
them or ordering goods that they supply. This could be in done with the promise of kickbacks
and other favors. Such as process should be carried out by various people to eliminate the
possibility of collusion. One person could select the goods to be ordered while another person
could be charged with the process of selecting the suppliers.
3.2. Cash Disbursement System
3.2.1. Lack of oversight
In the process of cash disbursement, there lacks the process of checking the
correctness and accuracy of cheques written. There is no officer who verifies that the cheques
written by the cash disbursement clerk is backed up by an expenditure. Additionally, there is
no other document related to the expense being paid for accompanies the cheque. The cash
disbursement clerk just creates a cheque and sends it for signing without any proof of
transaction.

Bell Studio Systems 12
Lack of oversight exposes the disbursement procedure to the risk of fraud. This is
because the cash disbursement clerk could potentially write a fictitious cheque and send it for
signing without anyone noticing the potential fraud. Additionally, the clerk could also be able
to write a cheque for higher amount than the actual amount being paid. This creates a
loophole for financial mismanagement and fraud. The best method to address this would be
to have a cheque prepared and accompanied by documentation of the payment. The treasurer
would then verify the cheque against the transactions before signing the cheque. This would
reduce the possibility of fraud or errors being made by the disbursement clerk.
3.2.2. Lack of Payment Review process
The cash disbursement system lacks the payment review process. There does not exist
any process or department to review outgoing payments. All transactions go ahead without
any review. The cash disbursement clerk writes a cheque and the treasurer signs it. This
allows the payment to take place without the input of any other person within the company.
The managers or directors are not required to authorize or review payments. For this reason,
the disbursement clerk and the treasurer could collude to have payments take place
fraudulently. This exposes the system to the risk of fraud. A proper payment process would
require more people to authorize the payment to safeguard against fraud. However, the
system fails to have such controls therefore exposing it to the risk of fraud.
3.3. Payroll System
The payroll system contributes to one of the biggest expenses in most of the
companies. Ability to secure the payroll system would reduce the risk of losing a lot of
money through fraud and manipulation. However, the Bell Studio payroll system has been
identified to contain some internal control weaknesses. This create an environment where
various people are able to exploit the system for their own benefit.

Bell Studio Systems 13
3.3.1. Manual data input
The biggest weaknesses of the payroll system is the dependence on manual data input.
This form of data is difficult to verify especially when it is used to support payment. The
payroll clerk inputs the number of hours worked by each employee. This process is error
prone. Underpayment errors are more likely to be reported whereas overpayments would
never be reported (Kelly and Deklepper, 2016). The manual entry method can also be used to
deliberately bump the number of hours worked for employees.
The manual data entry process of work hours exposes the system to the risk of
possible manipulation. Employees could be able to record more hours worked than the actual
number of hours unless someone was there to verify the recorded hours in relation to the
actual hours worked. Similarly, the employees could be able to collude with their supervisors
to record more hours than they had worked for. Someone could also be able to access the
manual records and manipulate them after data had already been recorded.
Bell Studio information system has implemented a computer information system to
assist in handling its operations. The major areas covered are the purchases, cash
disbursement, and payroll. The purchases system assist in the process of acquisition of goods
needed by the company while cash disbursement system provides features for paying for the
acquired goods. The payroll system assists in handling employees’ payment for their services.
Each module is modelled to satisfy the business need of a specific department. The use of
Data flow diagram allows us to understand how data flows within the system. Similarly, the
use of system flowchart enables us to understand the execution path of various processes. The
company has put in place some internal control measures to ensure proper operation of the
system. However, various weaknesses exist within the system. The purchases system suffers
from lack of properly defined procurement process. This creates a risk of possible fraud.
Additionally, lack of authorization for initiating actions compromise the system for possible

Bell Studio Systems 14
misuse and fraud. The cash disbursement system lacks oversight, which puts the system at a
risk of fraud. The payroll system dependence on manual entry creates the risk of possible
manipulation and collusion. The management of Bell studio should work to ensure that these
weaknesses are rectified to ensure integrity of the system.

Bell Studio Systems 15
Reference List
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(Accessed: 27 April 2019).
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Security. doi: 10.1080/07366981.2014.920669.
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