Case Study- Adam & Co

Running head: CASE STUDY- ADAM & CO
Case study- Adam & Co
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CASE STUDY- ADAM & CO
Executive summary:
The paper is prepared to analyze the given case study by addressing the facts identified. In
this paper, risks, process and internal control system of the expenditure cycle of Adam and
Co has been evaluated. The expenditure cycle proceeds in three main systems of the
organization that is purchase system, cash disbursement system and payroll system. Analysis
of such system is done by preparing of flow chart depicting the flow of activities in respective
systems. In the later part of the paper, the weakness in the internal control of each of the
systems described has been demonstrated along with the risks faced by the organization in the
presence of such shortcomings.

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 evaluate the risks, process and internal control of the
expenditure cycle of the company named Adam & Co illustrated in the case study. Evaluation
of the risks and internal control system of the expenditure cycle is done by analyzing the facts
presented in the case study. Discussion includes evaluating the purchase system, cash
disbursement system and the payroll system of Adam & Co and the analysis of all such
systems are done by drawing a system flow chart. Such system flowchart helps in the
identification of different elements in the process and understanding the interrelationships
between several steps of the system (Libby 2017). Later part of the report demonstrates the
description of the weakness of the internal control system and the risks associated with each
system.
Discussion:
System flow chart of purchase system:
Depletion of inventories is done by the firm by transferring raw materials in the
production process and the finished goods are sold to the customers. The process of purchase
by the purchasing clerk of Adam & Co is initiated when the inventory is dropped to a
predetermined level. The procedures of determining the inventory varies from one firm to
another firm and for each of the items of inventory, clerk purchase separate purchase order
recognition. The procedures of purchase involves identifying the needs of inventory, placing
the order, receiving the order and recognition of liability in the form of account payable.
Inventory is monitored and controlled by the clerk and after then inventory has fallen to a
predetermined reorder level, then a digital purchase order is prepared by clerk by selecting
valid vendor file (Appelbaum et al. 2017). When preparing digital purchase order, two hard