Case Study - Bell Studio: Expenditure Cycle Analysis

Case Study – Bell Studio 1
CASE STUDY – BELL STUDIO REPORT ON THE EXPENDITURE CYCLE
Student’s Name
Student’s Code
Professor’s Name
Institution Affiliation
Date

Case Study – Bell Studio 2
Executive Summary
This paper is a report to the Chief Operating Officer in Bell Studio Organization, an
Adelaide-based wholesaler of art suppliers. The main aim of this report is to analyse
processes, risks and internal controls in the expenditure cycle. Considering the company’s
centralized accounting system with various networking terminals in different locations, this
paper composes an in-depth evaluation of the expenditure cycle process. In this rationale,
three systems that constitute the expenditure cycle will be discussed: purchases systems, cash
disbursement system and the payroll system before evaluating the risks of each system. The
first part of the paper will provide an overview of the reports and the conceptual systems Data
Flow Diagram (DFD) will be discussed in the second section. Afterward, the system
flowchart will be analyzed before the section that discusses the potential weaknesses and
risks of each system.

Case Study – Bell Studio 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..................................................................................................8
Data Flow Diagram of Payroll System......................................................................................9
System Flowchart of Purchases System...................................................................................11
System Flowchart of Cash Disbursements System..................................................................13
System Flowchart of Payroll System.......................................................................................14
Internal Control Weaknesses and Risks in Each System.........................................................15
Purchases System.................................................................................................................15
Cash Disbursement Systems................................................................................................15
Payroll Systems....................................................................................................................15
Conclusion................................................................................................................................16
References................................................................................................................................17

Purchasing
Department
Inventory
Warehous
e
Cash
Disbursement
Department
Monitor inventory
records
Updates inventory
records
Receives Goods
Prepares Digital
Purchase Order
Updates Inventory
Control Access
Updates 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 – Bell Studio 4
Introduction
The main objective of the expenditure cycles is to enable the conversion of the
company’s business cash, human resources and physical materials that enhance various
functions in the organization. In that regard, this paper analyses the expenditure cycle
(purchases systems, cash disbursement systems, and payroll system) in the Bell Studio
organization, including the evaluation of the relevant weaknesses and risks of the systems.
The main purpose of this report is to enable the Chief Operating Officer to evaluate the risks,
processes and internal controls for its expenditure cycle.
Data Flow Diagram of Purchases and Cash Disbursements Systems
Purchase System
Figure 1: Purchase System Data Flow Diagram
Inventory
Subsidiary
Ledger