HI5019: Accounting Information System Analysis Report

This report provides an analysis of an accounting information system, focusing on revenue cycle management within RCE Limited. It examines the costs associated with establishing separate departments for warehousing, shipping, and inventory control, considering their impact on the revenue cycle. The report identifies potential internal control weaknesses in sales order processing and cash receipts procedures, discussing associated risks like management control bypass and restricted privacy protection. It also explores various types of fraud that could affect the company, including identity theft, cash larceny, and skimming, providing a comprehensive overview of the system's vulnerabilities and potential mitigation strategies. The report concludes by summarizing the importance of robust internal controls to safeguard the company's financial stability.

Analysing an Accounting
Information System

EXECUTIVE SUMMARY
The report summarise, the method of recognising, receiving, and handling the firm's
earnings from higher earners depending on the details rendered is known as revenue cycle
management. A robust RCM step is crucial for a company’s practice's financial stability and
intention to maintain providing high-quality services to its customers. The report also includes,
departments for warehousing, shipping and inventory control is considered a necessary cost for
the added benefit of control over inventory, potential internal control weaknesses in the sales
order processing procedures and cash receipts procedures and potential risks associated with the
internal control weaknesses. The report also summarise the types of frauds related to the
companies.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
Main Body.......................................................................................................................................4
1. “The additional cost required to establish separate departments for warehousing, shipping
and inventory control is considered a necessary cost for the added benefit of control over
inventory.” Discuss this statement in the light of existing revenue cycle of RCE Limited........4
2. Describe potential internal control weaknesses in the sales order processing procedures and
cash receipts procedures of RCE Limited...................................................................................6
3. Discuss the potential risks associated with the internal control weaknesses...........................6
4. Types are frauds are possible to the company.........................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The income process starts when a patient schedules a consultation as well as finishes
whenever payment is received successfully (Assagaf and Ali, 2017). That being said, there are
several phases between those which must be done correctly and reliably in order for
compensation to be made on schedule. System failure may lead to inaccurate sales due to
programming inconsistencies, misinterpretation, payroll management mistakes attributable to
conflicting records, and missing data or spelling mistakes. Charges are also collected in the
centre of the tax period. Charges may well be recorded as a result of instructions inserted directly
through an Interdisciplinary team by suppliers and then after the support is made and reported by
ancillary personnel.
Main Body
1. “The additional cost required to establish separate departments for warehousing, shipping and
inventory control is considered a necessary cost for the added benefit of control over
inventory.” Discuss this statement in the light of existing revenue cycle of RCE Limited.
The different categories of costs a company incurs are referred to as its cost structure,
which is usually made up of fixed costs and variable costs. Fixed costs were expenses that do not
vary depending on how much input a business generates, while variable expenses change
depending on how much output it generates. In the context of RCE LTD there have been
different requirement of cost in order to establish various crucial department these are as follows:
Warehousing: The handling cost centre must include any costs involved with transporting
goods into or out of the warehouses. The labour used to process the commodity as it goes it
through fulfilment centre seems to be the largest factor. Receiving, put-away, order collection,
and loading are all included. That may also require labour for re-warehousing, repackaging, or
refurbishing defective merchandise. The expenses involved with the machinery used to process
merchandise in the factory, such as maintenance as well as the expense of gasoline or energy to
operate the machinery, are included in handling. Imprisonment of vehicle or track vehicles,
running equipment, and waste disposal are just some of the handling costs. In practise,
managing costs provide all costs involved with "good and services in motion." Almost any of the
facilities offered by a logistics company could be repeated by a contractor operated internally.
The customers will be capable to calculate the "do-it-yourself" process of providing equivalent

logistics facilities if they know how much space they'll require and how many employees they'll
really have to operate the activity.
Shipping: This really is the simple freight transportation fee that company would transfer
to the supplier in order for them to transport the goods from one main port or airline to some
other coastal city or airport (Bockova and Zizlavsky, 2016). This method allocates the company's
overhead costs, and they can expect to see at least a few extra expenses based on the
circumstances. The Collection Fee includes the cost of transporting freight from the location to
the destination terminal. The shipping company is responsible for this fee. This invoice can
contain a baggage fee that can be assessed by the length to be travelled as well as the cargo's
category or volume. The Peak Season Service fee is a fee paid by the carrier for freight
transported at a certain time of year known as summer months. Despite the fact that carriers
typically pay exorbitant basic fares throughout peak season, they must charge an extra fee to
finance their expanded operations. This freight delivery bill will be charged to the manufacturer
to cover additional measures in the event that the cargo is threatened by various situation. Since
these places would be more at threat, this surcharge will only be extended to freight.
Inventory: Simply put, this really is the rate of rent a company pays and for warehouse
space where they keep their product. This would be both the actual direct rent paid for any and
all facilities or a fraction of the overall rent paid for the office space used to store inventory. If
perishable product isn't really sold quickly enough, it can rust or spoil, so supply chain is critical
to avoid spoilage. Many companies are concerned with products that expires. The production and
use-by periods of the commodities have an effect on markets like food and beverage, pharmacy,
education and metrics. This is a part of inventory expense that is less well-known. To determine
the magnitude of this cost's effect on the P&L statement, company will need to do some math.
The level of revenue a company loses on existing inventory sitting in inventory is referred to as
inventory currency risk (Eklof, Podkorytova and Malova, 2018).
2. Describe potential internal control weaknesses in the sales order processing procedures and
cash receipts procedures of RCE Limited.
In the context of RCE limited some potential internal control weaknesses in the sales order
processing procedures and cash receipts procedures are discussed underneath:
 Perception of service quality' sales invoices are approved with a quick e-mail notification
to RCE Ltd. There's a higher chance of consumer fights over orders sent out, and Ace Co.

will suffer damages as a result. As a result of products being shipped against illegal
orders made mostly with firm, the company faces an enhanced chance of loss.
 Both forms of credit management must be handled by sales managers. RCE Ltd is
already at a higher risk of accumulating poor debts. This really is due to a breach of trust
between sales reps' need to maximise consumer sales and their responsibility to reduce
the possibility of consumer debt. The issue is depended on the assumption that sales reps
are paid bonuses cantered on sales results (Haninun, Lindrianasari and Denziana, 2018).
 Customers are sent invoices simply because they have placed an order. There is a
significant chance that purchase proceeds will be wrongly recognised due to the delivery
of products delivered from consumers. As a result, there's a chance that earnings will be
underestimated as well that decrease the performance.
 Sales incentives are compensated on the basis of payment advice, with payments being
submitted without proof of consumer delivery of merchandise. There is a significant
possibility that the corporation will pay bonuses on profits that are not done. Bonuses can
be analysed and determined of that same sales team and only approved by an unbiased
accountable officer to enable internal auditing. Pension benefits that have been approved
must be transferred to RCE ltd's salaries process and send into the firm's payroll system.
 In the exchange receivables register, there are insufficient restrictions on the opening of
consumer accounts. There seems to be a higher chance of the business losing money due
to bad loans resulting from payments to untrustworthy consumers, as well as a threat of
failure money due to shipments to fake customers.
 Throughout the accounts payable of RCE ltd, there seems to be an insufficient audit trail
of revenue transactions. Revenue from sales purchases must be acknowledged by the
time when consumers receive their computers. Customers' shipping cost reports are also
critical to the business's financial department in deciding when sales transactions can be
recorded throughout the company's financial reporting. The accounting department is still
unaware of the release date. There seems to be a greater chance that perhaps the financial
reports for revenue activities would be unreliable and incorrect (Liu, Vredenburg and
Steel, 2019).

3. Discuss the potential risks associated with the internal control weaknesses.
In the context of RCE LTD some of the possible risk associated with internal control weaknesses
are as follows:
 Management Control Bypass: Since management is solely instrumental in the creation,
execution, and operation of accounting practices, management has the intrinsic authority
to modify these control measures. It is a challenge that is difficult to resolve if an
individual has the opportunity and a motivation to override restraints and commit
misconduct, like earnings expectations or specific financial problems. It needs someone
in responsibility of management, like owners and managers, to actively participate in
assessing the likelihood of fraud happening at the company and ideas that emerged
measures to mitigate the danger of advantages where fraud threats are detected (Lu,
Liang and Wang, 2020).
 Restricted Privacy protection: No one party must be in charge of transaction approval,
tracking, or possession of the affected properties of transfers. Owing to insufficient
manpower, smaller organisations may have difficulty enforcing adequate segregation of
responsibilities, but larger corporations may still have problems if the division is not well
planned. Compensation controls, like regulation, management, and accountability by
managers or others entrusted with leadership, are needed in each process to better ensure
the priorities are fulfilled.
 Detective Controls vs. Preventative Controls: While detective controls can identify if
anything is wrong, it might be too early that the harm has been done. A healthy internal
management scheme includes both investigative and preventative measures. Risk
measures could include topics like continuing policy and protocol training, enforcing
login credentials to restrict access to the database or verbal communications in within
program, having dual fingerprints on payments, or reviewing and approving payment
requests before they are made.
4. Types are frauds are possible to the company
 Identity theft: A billing scheme entails a person filing redundancy notices that the
company pays; although the funds are disbursed legitimately, the payee is untrustworthy
(Narteh, 2018). The second most prominent ways this scam is carried out are by the use
of a "cover" business that issues bogus invoices, and through merely paying a legal

vendor twice. It's as simple as going at how a legal receipt from a retailer was already
changed to detect any former method of billing scheme. A clear analysis of the container
as well as its relationship to the corporation will reveal the deception in the case of an
alleged shell in RCE Ltd.
 Cash Larceny: It is about a person who steals money once it has been put into accounts.
A fraud that takes place whereas a company's cash payment is being delivered to the
financial institution. Cash larceny is also easy to detect due to the crime's visibility
throughout the system of RCE Ltd. Someone could be generating income when it leaves
the account if money is still not withdrawn, the ratio of checks-to-cash in such a deposit
falls from usual, or the company's earnings do not equal its investments. The only way to
avoid this type of theft is to nominate a trusted and approved entity to deposit cash
whereas another figure of authority compares the initial wire transfer to just the sales
commissions.
 Skimming: In the most simplistic nature, skimming entails removing funds from an
organisation before they will be registered. Skimming occurs before asset labelling,
unlike money larceny that happens just after assets have been registered, rendering this
form of theft more difficult to spot. The most straightforward way to spot skimming
would be to glance at total sales and ask, if the profit is dipping much below the projected
profit based on number of clients in RCE Ltd, there might be skimming throughout the
company. Also, once people are complaining about being paid for payments that aren't
owed to them, it's time to take action (Parvadavardini, Vivek and Devadasan, 2016).
CONCLUSION
In last of report, it is concluded that Financial results planning is a significant
consideration because it is linked to finance, as well as any company should successfully
leverage it in order to sustain and grow in the face of rising energy prices. As a result of the
above, normal costing is critical for any company, and the related costs, which are critical, must
be identified, tracked, measured, and handled correctly so that they add to the company's
business reputation rather than ruining and destroy the public reputation.

REFERENCES
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