Internal Controls and Systems Documentation

The report discusses the inventory expenditure process of Big D’s Electronics and its data flow diagram. It identifies the external entities and system components involved in the process. The report also highlights the internal control weaknesses and their impact on the system performance. It suggests controlling measures to mitigate the weaknesses.

Running head: INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
Name of the Student
Name of the University
Author Note

1INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
Executive Summary:
The company known as Big D’s Electronics is specialized for making different kinds
of electronics devices like computers, headphones, drones, smart phones and the printers. The
products are supplied to the retail stores located in Sydney and Newcastle from the central
warehouse of the company which is in outskirts of Sydney. All the purchased inventories are
transported to the warehouse at first and then delivered to the retail stores as per the
requirement. Now, a data flow diagram of the company’s inventory-expenditure process is
developed using MS Visio tool which links the automated system components with external
entities like humans with their corresponding activities.

2INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
Table of Contents
Introduction:...............................................................................................................................4
Data flow diagram of Big D’s Electronics inventory expenditure process:...............................4
Level 0 DFD:..............................................................................................................................7
Conclusion:................................................................................................................................9
References:...............................................................................................................................10

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Introduction:
The external entities in the inventory expenditure process are one purchasing clerk,
one purchasing manager, three warehouse clerks and two part time accounts payable clerk,
suppliers of inventories and bank as identified for minimal representation of the system. The
purchasing clerk orders inventories on request from the inventory system and after approval
from the purchasing manager. The suppliers are asked through mail by the purchasing clerk
to send their quotes for the inventories and purchasing clerk decides the supplier from
company’s benefit and then orders from the chosen supplier (Long 2018). Then the supplier
delivers the order in the warehouse and the warehouse clerks accepts the order after
verification. On weekly basis the received new orders in warehouse are updated to the
inventory system by warehouse clerks through mail and the report is send to the accounts
payable clerks (Mäkelä et al. 2016). The accounts payable clerks decide the valid orders from
the reports and then sends account payable data to the bank with which the company has the
current account. The bank then pays to the respective supplier.
Data flow diagram of Big D’s Electronics inventory expenditure process:
The Big D’s electronics company sells inventories like smart phones, computers, the
printers and wireless headsets from its stores located at Sydney and Newcastle. The inventory
expenditure process of the company is complex and wide, thus it is modelled using a DFD
(data flow diagram) as shown below. The system components in this system are
1. Sale
2. Inventory
3. Procurement
4. Payroll

4INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
The external sources in this system are purchasing clerk, purchasing manager, warehouse
clerk, supplies, accounts payable clerk and bank.
The activities are connected with the suitable entities and the system components. In the level
0 Data Flow Diagram (DFD) the main system components are shown only and the
interconnections of the external entities are modelled by several activities which are
described as follows (Xiong et al. 2017). At first the customer orders the product and the
order request goes to the sale system where all the orders of the customers are placed in a
date wise format. Then the sale request goes to the inventory system where the product is
checked. If the product is not available in the inventory then a purchase requisition request
goes to the system used by purchasing clerk. The purchasing clerk reviews the request and
accepts if appropriate based on its availability in supplier list of company. The purchasing
clerk sends an approval mail to the purchasing manager via inventory system. The purchasing
manager accepts if the request is appropriate and the goods approved mail goes to inventory
system and from there to purchasing clerk’s system. Upon receiving the approval mail the
purchasing clerk requests the goods to the company’s supplier list. Then when the suppliers
update the quote amount, the purchasing clerk decides the most beneficial supplier from the
list based on the experience of supplier in business and the money charged by the supplier.
This is handled through the procurement system component. The chosen supplier is also
notified about delivering the order to the warehouse (Moser, Isaksson and Seifert 2017). The
warehouse clerk is notified about the arrival of the order by the procurement system and the
warehouse clerk sends an update to the inventory system about the order and also sends
weekly the goods received report to the accounts payable clerk if all the goods supplied by
supplier is appropriate. The accounts payable clerk verified the goods report and if the report
is proper then the sends a mail to the payroll system about validity of the order. The order is
valid if the purchase order is not invalid or unpaid. In case the order is invalid or paid a mail

5INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
is sent to the payroll system which is forwarded to the supplier. Now, when the order is valid
then the accounts payable data is sent to the bank via the payroll system. Ultimately, the bank
pays the amount to the suppliers account.

6INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
Level 0 DFD:

7INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
Now, the internal control weaknesses, Impact of the weakness and controlling the weaknesses
of the inventory expenditure process is listed in the following table.
Internal Control Weakness Impact of the weakness Control to mitigate the
weakness
The efforts put by purchasing
clerk and the warehouse clerk
is more than the other
employees. The purchasing
manager have very less work to
do in comparison to other
workers.
As the amount of work done by
the purchasing clerk and
warehouse clerk is vast and
hence errors are more likely to
happen with them. This can
lead to false business
requirements and even if there
was no mistake from
purchasing manager still it will
require unnecessary
verifications of the purchasing
orders and will consume lot of
time.
The verification of purchase
orders can be done by the
purchasing manager himself
and hence less time will be
required in the process. This
will also reduce the workload
of purchasing clerk.
Often some purchasing goods
for the inventory can become
almost equal amount of money
for different suppliers. In that
case the purchasing clerk needs
to decide the supplier based on
his tenure in the business. This
The delivery of orders to the
customers takes lot of time due
to the request time of order to
supplier by purchasing clerk
and choosing suitable supplier
from list by purchasing clerk.
This can lead to customer
An automated software may be
deployed in the system which
correctly chooses the most
beneficial supplier from the
supplier list in terms of
experience of supplier and
charge demanded for the order.

8INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
requires lot of business time. dissatisfaction and can hamper
the business.
The chosen supplier can be
overviewed by the purchasing
clerk for verification.
The accounts payable clerk
manually verifies or matches
all the three documents from
the invoices folder. When lots
of orders are coming from the
customer then this process is
very much time consuming.
The accounts payable clerk can
make unforced mistakes when
verifying sets of document for
many orders. This can lead
false payment to the supplier
and thus business can incur
loss.
An artificial intelligence for
document scanning process can
be employed to reduce the
workload of the accounts
payable clerk and thus the
unforced errors can be
eliminated.

9INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
Conclusion:
Hence, for the Big D’s Electronics company the inventory expenditure process is
properly modelled using a level 0 DFD diagram with appropriate labelling of the activities
within the external entities and the system components. The DFD can be more detailed or a
level 1 DFD can be developed for the system where each system components will be broken
into fundamental components and the sub-activities will be shown for the entire process.
Furthermore, the faults or weakness of the system control is also identified and how it affects
the system performance is shown along with the improvement ideas regarding small changes
in the automated system is provided at the end of the report.

10INTERNAL CONTROLS AND SYSTEMS DOCUMENTATION
References:
Long, J.E., 2018. Relationships between common graphical representations used in system
engineering. INSIGHT, 21(1), pp.8-11.
Mäkelä, J.S., Lakkala, K., Koskela, T., Karppinen, T., Karhu, J.M., Savastiouk, V.,
Suokanerva, H., Kaurola, J., Arola, A., Lindfors, A.V. and Meinander, O., 2016. Data flow of
spectral UV measurements at Sodankylä and Jokioinen. Geoscientific Instrumentation,
Methods and Data Systems, 5(1), pp.193-203.
Moser, P., Isaksson, O.H. and Seifert, R.W., 2017. Inventory dynamics in process industries:
An empirical investigation. International Journal of Production Economics, 191, pp.253-266.
Xiong, H., Zhang, H., Dong, X., Meng, L. and Zhao, W., 2017, September. DFDVis: A
Visual Analytics System for Understanding the Semantics of Data Flow Diagram.
In International Conference of Pioneering Computer Scientists, Engineers and
Educators (pp. 660-673). Springer, Singapore.