Evaluation of Risk and Internal Control Process in Adam & Co

Running head: CASE STUDY- ADAM & CO
Case study- Adam & Co
Name of the Student
Name of the University
Author Note
Executive summary:
The report is prepared to evaluate the risk and internal control process in terms of its
strength and weakness. The analysis is based on the case study presented on the
company Adam and Co. The three department of Adam and Co has been separately
analyzed using the system flow chart that depicts the process in identified steps.
These departments include purchase department, payroll department and cash
disbursement department. The later part of the report depicts the description of the
weakness of internal control system of each departments.

CASE STUDY- ADAM & CO
Table of Contents
Introduction:..................................................................................................................2
Discussion:...................................................................................................................2
System flow chart of purchase system:........................................................................2
System flow chart of cash disbursement system:........................................................2
System flow chart of payroll system:............................................................................2
Identifying the internal control weakness in the system and its associated risks:.......2
Conclusion:...................................................................................................................2
Reference list:...............................................................................................................3

CASE STUDY- ADAM & CO
Introduction:
The report is prepared to be presented to the managing director of Adam &
Co evaluating the risks, process and internal control of the expenditure cycle of the
company. Adam and Co is a wholesaler of supplies which source its inventories from
different countries such as Thailand, China and Vietnam. The procedure of
expenditure cycle of the company comprised of purchase system, cash
disbursement and payroll system. The risks, process and the weakness associated
with the internal control of the different systems of the company has been evaluated.
The process different systems of has been understood with the help of flow chart
which helps in evaluating the state of the current situation for further improvement
(Salimi et al. 2016).
Discussion:
System flow chart of purchase system:
The system of purchase involves the journey from the creation of purchase
order through the approval of purchase order, delivery, invoicing and closure and the
purchase order becomes a legally binding document if the purchase order is
accepted by the vendor. The process of the purchase order comprise of various
checkpoints and approval of the tasks of input for ensuing that the processing of
purchase order is done timely. Hence, purchase system initiates with the
identification of the need of inventory, placing the order, receiving inventory and
recognizing the liability. The depletion of inventories is done by selling the finished
goods. A digital purchase order is prepared by the purchasing clerk when the level of
inventories drop below the predetermined point and the purchase order is made to
the vendor after they are chosen from the vendor file. The purchase order process
initiated when the copy of purchase order is send to vendor as well as to the
purchasing department and the purchase order file has the digital record of purchase
being done (Apostolou et al. 2017).
The process of purchase order can be made efficient if much of the routine
ordering information needed by the purchasing department from the valid vendor file
and inventory is supplied by the inventory control function. In the next step of the
purchase process, the receiving department receives the goods that has been
ordered. The information presented in the digital purchase order and the purchasing
slip is reconciled against the goods received by the receiving clerk and this is done
after inspection. Two hard copies of receiving reports is manually prepared by the
receiving clerk. Receiving report is filed by the clerk in the department after the
inventory subsidiary ledger has been updated and the goods are shelved. The
accounts payable department receives the other copy of the receiving report where
the filing is done until the arrival of the invoice from supplier. Accounts payable clerk
is also responsible for reconciling the three documents that is hard copy of digital
purchase order, invoice from suppliers and receiving report. In addition to this, the
digital accounts payable subsidiary ledger, inventory control account and the
accounts payable control account is updated by the accounts payable clerk in the
general ledger. The step of purchase process is completed after the receiving report,

CASE STUDY- ADAM & CO
invoice and the purchase order copy is send to the cash disbursement department
(Loo and Bots 2018).