Case Study of Bell Studio: Expenditure Cycle and Internal Controls

This case study analyzes the expenditure cycle and internal controls at Bell Studio, including the activities, decisions, risks, and controls involved. It discusses the ordering process, receiving and storing goods, and payment procedures. The report also highlights the risks associated with each process and suggests ways to address them.

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Strategic Information System
Case study of Bell Studio
Student Name
Institutional Affiliation
Date
1 | P a g e

Executive Summary
Expenditure cycle can be portrayed as an amassing of activities identified with buying, and
installment for services and product. The cycle starts by when a firm needs some administration
or product for an administrative limit or selling. The invested individual must fill an order
structure giving all of the nuances and sending it to the purchasing division. The focal point of
this paper is a discussion on the different exercises and procedures that are completed in the
expenditure, the choices that must be made and the data that is required to settle on these
choices, the primary hazard, and dangers in the consumption cycle, and the inner controls
required to address the dangers. The organization should put more complement on their stock
control is given any inadequacy may understand exceptional issues with this method. The choice
of the method for stock control is the essential issue that impacted the mentioning strategy.

Table of Contents
Executive Summary...........................................................................................................2
Introduction........................................................................................................................4
Data Flow Diagram (DFD) of Bell Studio Purchases and Cash disbursements
systems............................................................................................................................................5
DFD for Bell Studio Payroll System.................................................................................5
System Flowchart of Bell Studio Purchases System.......................................................6
System Flowchart of Bell Studio Cash Disbursements System.....................................7
System Flowchart of Bell Studio Payroll System................................................................8
Description of internal control weakness in each system and risks associated with
the identified weakness..................................................................................................................8
Expenditure Life Cycle Overview...................................................................................8
Expenditure Procedure business Processes.....................................................................9
The request of materials, the services offered and what to be supplied...............9
Receiving and Storing Goods....................................................................................9
Pay for Products and Services................................................................................10
Risks in the Ordering Process........................................................................................10
Risk Payment Procedures..............................................................................................11
Conclusion........................................................................................................................11
List of References.............................................................................................................13

Introduction
Expenditure cycle can be portrayed as an amassing of activities identified with buying,
and instalment for services and product. The cycle starts by when a firm needs some
administration or product for an administrative limit or selling. The invested individual must fill
an ordered structure giving all of the nuances and sending it to the purchasing division. Chow et
al., (2018) has portrayed inner control as a system that is connected with the differentiation rent
practices and methodology made by substances that are away for confirming assets, improving
profitability, ensuring the accuracy of bookkeeping data information, and evaluating the
consistency of strategy and methodologies of the officials.
This report idea is separating the methodology, threats and inside controls for utilization
cycle at Bell Studio. The consideration will major in the stated sections. It will show the
flowchart and data stream graphs for the different systems, analyzing the various activities and
methods that are done in the utilization, the decisions that must be made and the information that
is required to settle on these decisions, the major peril and risks in the utilization cycle, and the
internal controls required to address the threats.

Data Flow Diagram (DFD) of Bell Studio Purchases and Cash disbursements systems
DFD for Bell Studio Payroll System

System Flowchart of Bell Studio Purchases System.

System Flowchart of Bell Studio Cash Disbursements System

System Flowchart of Bell Studio Payroll System
Description of internal control weakness in each system and risks associated with the
identified weakness
Expenditure Life Cycle Overview
Ideally, when Bell Studio needs to source its inventories from the unmistakable creators,
the association needs to at first exchange information with the supplier or traders inquiring as to
whether the items required are available. This information is extraordinarily key for external and
inside budgetary uncovering and to the general record (Aguiar, 2013). The foremost goal of the
utilization cycle is to lessen all the absolute expense of getting and caring for administrations,
supplies, and stock (Ayagre, 2014). A bit of the guideline decisions that Bell Studio must make
concerning the consumption cycle fuses where the product will be put away. The company

management also needs to assess the effectiveness and efficiency of the processes involved in the
expenditure cycle (Burt, Petcavage and Pinkerton, 2011). The data used in the expenditure cycle
need to be accurate and it should contain information about the agents who are involved, the
resources affected, and the events that occur.
Expenditure Procedure business Processes
In this case, there are about three major procedures with regards to the Expenditure cycle,
as explained in details below.
The request of materials, the services offered and what to be supplied
This strategy incorporates recognizing what, how much, and when to purchase and from
which maker. The association should put more highlight on their stock control because any
weakness may accomplish critical issues with this method. The choice of this procedure for stock
control is the primary thought that impacted the mentioning procedure. There are three different
ways to manage stock control from which Bell Studio can investigate: Material Requirements
Planning, Economic Order Quantity, and Just In Time Inventory.
MRP is usually applied to minimize the inventory levels as it enhances the accuracy of
what has been predicted and thus making one to have a careful purchasing method and schedule
production within the given predictions. JIT systems usually have smaller but deliveries which
are regular and affects the business directly. Lastly is the EOQ which is an aged approach that is
used for management of inventories with the aim of keeping sufficient stock so that the process
of production is not in any way halted.
Receiving and Storing Goods
This methodology incorporates the enduring movement of materials from the
manufacturer. The materials received must be passed on to the stock control capacity to keep up

best in class records. The receiving division has two critical occupations: to affirm the received
items and determine whether to recognize or reject them subject to the status and nature of the
materials. The check strategy is critical because it ensures that the total and nature of materials to
be received is what was mentioned.
Pay for Products and Services
This process involves making the payment after receiving and verifying the materials
ordered. Two sub-processes are involved in this process: approving the invoices of the
manufacturers and making the actual payment of the invoices. The accounts payable department
is responsible for approving the manufacturer invoices. The law obliges that payment should be
made upon receipt of the materials, but most companies make the payment after receipt and
verification of both the materials and invoice. The accounts payable department is responsible
for initiating payments for goods that the company ordered and were delivered. There are two
essential methods to processing manufacturer invoices (Länsiluoto, Jokipii and Eklund, 2016):
Bell Studio can improve the viability and proficiency of the payment procedure by having the
producers present their invoices through EDI because the framework will coordinate their POs
consequently with the receiving reports.
Risks in the Ordering Process.
Ideally, excess stock or materials out of stock: the securing delegate may make a
purchasing demand for the things that are currently in stock. This will provoke plenitude stock.
Moreover, he/she may similarly concede in mentioning for new supplies required by Bell Studio,
and this may realize closure of the operational methodology given the nonappearance of creation
materials. This peril can be constrained by using fitting and strong deciding procedures, and
precise stock controls also should be used.

Another risk that may affect the ordering process is the mentioning of silly materials or
supplies: the labourers at Bell Studio may make a purchase interest for a thing that is not basic.
In this way, the purchasing agent may continue in mentioning the materials, and this will incite
the association acquiring futile things that have little a motivating force to the association of the
referencing specialist. The control of such a danger is database compromise for the different
divisions and produce reports that interface depiction of the thing to part numbers to support
demand association (Wood, 2014).
Risk Payment Procedures
Inability to recognize receipt bumbles: the records payable office and the cash
administering delegates may miss perceiving botches in the solicitations. A couple of figures
may have been balanced and may look so true. In that limit, they may wrap up supporting invalid
or off-kilter solicitations for portion. Regardless, this danger can be tended to by supporting
procurement cards, using a run of the mill transporter as far as possible, getting ready labourers
on load terms, using evaluated receipt settlement, and affirm logical precision (Pevzner, 2015).
Paying for materials not delivered: this may happen when solicitations are sent to the
records payable division before the things are delivered. Bell Studio may wrap up paying for the
materials that were mentioned yet have not been delivered. This risk can be obliged by using
restricted spending controls and checking the sums gotten by taking a gander at the sums nitty
gritty against sums delivered (Gaynor, 2015).
Conclusion.
Ideally, this report has tried to separate the methodology, threats and inside controls for
expenditure cycle at Bell Studio. The point of convergence of this paper was on the going with
fragments: discussing the various activities and strategies that are finished in the utilization, the

decisions that must be made and the information that is required to settle on these decisions, the
standard peril and risks in the consumption cycle, and the inside controls required to address the
threats.
The primary decisions that Bell Studio must make concerning consumption cycle fuse
where the product will be put away, the component of arrangements and stock to be delivered or
inventory to be carried and the manufacturers that offer quality materials at sensible costs. The
association should put more complement on their stock control because any weakness may
accomplish basic issues with this methodology. The choice of the system for stock control is the
essential thought that affected the mentioning procedure.

List of References
Aguiar, M. and Hurst, E. (2013). Deconstructing Life Cycle Expenditure. Journal of
Political Economy, 121(3), pp.437-492.
Ayagre, P., Appiah-Gyamerah, I. and Nartey, J. (2014). The Effectiveness of Internal
Control Systems of Banks. International Journal of Accounting and Financial Reporting,
4(2), p.377.
Ayam, J. (2015). An Analysis of Revenue Cycle Internal Controls. Case Studies in
Business and Management, 2(2), p.1.
Burt, D., Petcavage, S. and Pinkerton, R. (2011). Proactive Purchasing in the Supply
Chain. New York: McGraw-Hill Publishing.
Chow, V., Long, D., Wang, R. and Zhang, R. (2018). Joint Inventory, Pricing, and
Expenditure Control. SSRN Electronic Journal.
El Mahdy, D. and Thiruvadi, S. (2014). Antecedents, Characteristics and Consequences
of Internal Control Weaknesses and the COSO (2013) Framework. SSRN Electronic
Journal.
Hsueh, C. (2011). An inventory control model with consideration of remanufacturing and
product life cycle. International Journal of Production Economics, 133(2), pp.645-652.
Länsiluoto, A., Jokipii, A. and Eklund, T. (2016). Internal control effectiveness – a
clustering approach. Managerial Auditing Journal, 31(1), pp.5-34.
Pevzner, M. and Gaynor, G. (2015). The Impact of Internal Control Weaknesses on
Firms's Cash Policies. SSRN Electronic Journal.

Wood, J. (2014). IT Auditing and Application Controls for Small and Mid-Sized
Enterprises. Wiley.