Analysis of Adam & Co's Expenditure Cycle Process

Case Study – Adam & Co 1
CASE STUDY – ADAM & CO
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Case Study – Adam & Co 2
Executive Summary
This report has analysed Adam & Co business which is The Royal Bank of Scotland
PLC’s trading division and which caters for the need of private bank clients based on UK.
Adam & Co offers an array of private banking services that include discretionary investment
management alongside financial planning services to many high net worth customers in the
United Kingdom. It has a centralized accounting system with many networking terminals
located in different places in the UK and hence a deeper evaluation of Adam & Co expending
cycle process is essential in this case. The discussion focuses on the constituent system of
expending cycle including cash disbursement system, purchases system as well as payroll
system. The first section presents a brief overview of this report followed by a detailed
discussion of conceptual system data flow diagram (DFD). The last section discusses system
flowchart and summarizes the potential risks and weaknesses of the each of the three
constituent systems.

Case Study – Adam & Co 3
Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Data Flow Diagram of Purchases and Cash Disbursements Systems........................................4
Purchase System.....................................................................................................................4
Cash Disbursement Systems..................................................................................................7
Data Flow Diagram of Payroll System......................................................................................8
System Flowchart of Purchases System...................................................................................10
System Flowchart of Cash Disbursements System..................................................................12
System Flowchart of Payroll System.......................................................................................13
Internal Control Weaknesses and Risks in Each System.........................................................14
Purchases System.................................................................................................................14
Cash Disbursement Systems................................................................................................14
Payroll Systems....................................................................................................................14
Conclusion................................................................................................................................15
References................................................................................................................................16

Purchasing Department
Inventory Warehouse
Cash Disbursement Department
Monitor inventory records
Updates inventory records
Receives Goods
Prepares Digital Purchase Order
Updates Inventory Control AccessUpdates AP Control Access
Updates digital AP subsidiary ledger
Valid Vendor File
AP Pending File
Vendor
Account Payable Department
Inventory Subsidiary Ledger
Receiving File
Digital purchase order records
Purchase order copy 1
Purchase order copy 2
Receiving reports copy
Receiving report copy 2
Sends invoice
Sends invoice
Inventory level
Case Study – Adam & Co 4
Introduction
The major expenditure cycle’s spending is to allow the physical materials, human
resources and business cash’s conversion which enhance several organizational functions.
This report is an analysis of expending cycle including purchases system, cash-disbursement
system and payroll system in Adam & Co. This includes evaluating pertinent risks and
weaknesses of the systems to allow the Chief Operating Officer (COO) of Adam & Co to
assess the risks, processes alongside internal control of the firm’s expenditure cycle.
Data Flow Diagram of Purchases and Cash Disbursements Systems
Purchase System
Figure 1: Purchase System Data Flow Diagram
Inventory
Subsidiary
Ledger