HA2042 - Adam & Co: Accounting Information Systems Case Study

This case study examines the accounting information system (AIS) of Adam & Co, a company dealing with industrial products. The study focuses on the purchase, cash disbursement, and payroll systems, including their respective system flowcharts. It identifies and analyzes internal control weaknesses within each system, such as potential stock allocation issues in the purchase system, security concerns in cash disbursements, and data security risks in payroll. The assignment also highlights the risks associated with these weaknesses, like errors in computer systems, poor accountability, and discrepancies in payroll records. The conclusion summarizes the findings, offering insights into improving the AIS of the company. The assignment is a response to a case study brief requiring students to understand AIS in the context of organizational structure, identify and compare different types of AIS, and evaluate them using different methodologies.

Running head: ACCOUNTING INFORMATION SYSTEM
Accounting Information System
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING INFORMATION SYSTEM
Executive Summary
This current report has focused on the system of accounting that is directly associated with the
business along with pointing out the effectiveness of each system. Adam and Co has been
considered for this particular study which points out the nature as well as the sources of the
business. Purchase system, cash disbursement system and payroll system has been included in
this study. It also includes the inherent control weakness and risk of the mentioned accounting
information systems.

2ACCOUNTING INFORMATION SYSTEM
Table of Contents
Introduction......................................................................................................................................3
System flowchart of purchase system..............................................................................................3
System flowchart of cash disbursement system..............................................................................5
System flowchart of payroll system................................................................................................7
Description of internal control weakness in each system and risk associated with the identified
weakness..........................................................................................................................................9
Purchase system...........................................................................................................................9
Cash disbursement system...........................................................................................................9
Payroll system............................................................................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

3ACCOUNTING INFORMATION SYSTEM
Introduction
The accounting information system that is associated with an organisation mainly act as
the effective source of analysing the issues in the company. It deals with the set of information
which are helpful for the organisation that would be beneficial for the company in their normal
course of business. The system of information is required to be implemented in a business as it
helps in increasing the overall profitability along with mitigating all of the risk of the business. In
this study, Adam and Co has been considered which mainly deals with industrial products in
Perth that is located in Australia. It also includes the internal control weakness along with the
risk that are directly associated with the business.
System flowchart of purchase system
The purchase system that is directly associated with Adam and Co mainly highlights the
products and services which are provided to the customers in their normal course of business.
Certain parameters are required to be implemented for betterment of the business along with
highlighting the procedure of purchase for the business (Hribar, Kravet and Wilson 2014). It
would also help in mitigating the risk that are directly associated with the purchase system along
with highlighting the benefits for the company. The system of purchase mainly starts with
sending the details of order to the clients along with the prices that would be charged for the
products and services that would be required by the business. The effective measurement of the
business is also pointed by the purchase system along with preparation of the invoices that
consist of details of the products and services that would be required by the business (Fullerton,
Kennedy and Widener 2014). It also includes the effective system of purchase that points out the
effective process that starts with taking the order from the clients and sending the details to the
respective customers for running the business in a smooth manner. It also includes the supplier

4ACCOUNTING INFORMATION SYSTEM
that points out the effective assistance for fulfilling the order in the overall purchase system. The
older that are received by the company form the clients are required to be process faster than the
recent products which would be more effective in the system of purchase. The following figure
mainly points out the system flow chart of purchase system of the company that is Adam and Co.
Figure 1: System flowchart of purchase system
(Source: Created by Author)
The above figure points out the system flowchart of the overall system of purchase of
Adam and Co along with identifying the inventories and funds that are associated with the
business. The system of purchase mainly starts with purchasing of raw materials that would be
required for initiating the overall process (Ponisciakova, Gogolova and Ivankova 2015). The

5ACCOUNTING INFORMATION SYSTEM
appointed managers of the company mainly managers the quantity and confirms the order that
has already been ordered by the clients. The price that has been allocated is required to be
managed by the managers of the company for providing the benefits along the effective pricing
strategies that would be implemented in the company. After these processes, the pay cheques are
to be prepared that would be provided to the clines during purchasing of ordered material (Uyar,
Gungormus and Kuzey 2017). The diagram also highlights the arrival of goods that would be
reflected in their books of accounts along with adjusting the older products.
System flowchart of cash disbursement system
The cash disbursement system that is associated with the business consist of different
types of products and services that would be effective in delivering the effective service and
products to the customers. The transaction that are legitimate in nature mainly includes the
effective recording in their books of accounts that helps in paying for the materials and
verification of certain documents (Chae, Koh and Prybutok 2014). The factors that affects the
cash disbursement system includes the appointed clerk of the company Adam and Co in their
normal course of business. The books of accounts that are associated with the business for
regulating as well as maintaining the cash which is required to be utilised for the business
purpose. The receipt that are associated with the transaction of the business act as the
documentation which is beneficial for the company in their normal course of business. The total
amount of cash that are required to be disbursed includes verification of the documents that
points out the legitimate transaction (Andon, Baxter and Chua 2015). The following table mainly
shows the system flowchart of cash disburse system which points out the effective system of
cash disbursement.

6ACCOUNTING INFORMATION SYSTEM
Figure 2: System flowchart of cash disbursement system
(Source: Created by Author)
The above figure points out the system flowchart of cash disbursement system that
highlights the liabilities which are included with in the business. The appointed clerk of the
company that is Adam and Co mainly manages the preparation of employee card which would
be transferred to the payroll department (Budiarto and Prabowo 2015). The payroll department is
mainly responsible for managing the funds that would be transferred to the employees of the
company. The Company is also required to file the amount of income tax that would paid to the
government in their normal course of business. The department of payroll then transfers the files
to the tax arte reference depart that mainly deals with the amount if income that would be

7ACCOUNTING INFORMATION SYSTEM
payable by the employees after receiving their payment from wages and salaries. The cash
disbursement process mainly assist the appointed clerk of Adam and Co by the process of
preparation of cheque and other stuffs in the overall business procedures (Yigitbasioglu 2016).
The appointed clerk is also responsible for maintaining the invoices that has been prepared for
the goods which has been sold to the clients.
System flowchart of payroll system
The system of payroll which is directly involved in the company mainly helps in
providing the salaries to the employees who works for the company for achieving the targets and
goals of the company. The payroll system includes the total amount of taxes that are paid by the
employees to the government after every fiscal year (Charron and Raschke 2014). Every
employee in the organisation is paid with certain amount of wages and salaries that are
maintained by the process of payroll which is maintained by the appointed clerk of the company.
It also helps in pointing out the hours of working that are generally performed by the workers
along with payment of the wages. Total rate per hours is required to be multiplied by the total
hours of working for determining the total amount of salaries by the employees for a certain time
period. The system of payroll mainly introduced by the process of hiring the employees by the
human resource manager. After this particular process, the total amount of income tax is to be
deducted from the total income for a particular financial year along with includes other payment
by the company (Boučkov 2015). The appointed clerk of Adam and Co mainly records the total
hours of working and then sums up with the payment per hour for benefits the expenses to the
workers. The following figure shows the system flowchart of payroll system that highlights the
involvement of management.

8ACCOUNTING INFORMATION SYSTEM
Figure 3: System flowchart of payroll system
(Source: Created by Author)
The above figure shows the system flowchart of payroll system with functions of payroll
with the system of remittance. The payroll system of Adam and Co mainly starts with
department of payroll which points out the employees that work with the company along with
managing the report that is to be prepared by the managers of the company (Otley 2016). The
report that is prepared by the manager is then transferred to the cost centres that generally
approves the payment of the employees along with maintaining the targets for the company.
Remittance system is directly associated with the managerial report along with the system of
cash receipt for better efficiency in the process. The preparation of payslip is provided to the

9ACCOUNTING INFORMATION SYSTEM
employees as it act as receipt during the time of payment of salaries for a particular time period
(Schaltegger and Zvezdov 2015). At last, the system of cash receipt includes the working nature
of the employees that are required to be highlighted in the report by the managers.
Description of internal control weakness in each system and risk associated with the
identified weakness
Purchase system
The purchase system consist of certain internal control weakness that mainly deals with
the stock that are already present in the company. This might result in over allocation of stock
which can lead the organisation in financial loss along with chances of cancelled orders that
affects the overall business procedures (Hall, Millo and Barman 2015). The orders that are
misplaced might affect the overall transaction of the business organisation along with pointing
out the effective allocation of stock. There are certain internal control weakness that requires the
payment to be made in advance for experiencing better delivery within the actual prices. There
are certain risk that are also included in the overall process of purchase such as errors in the
computer system that gains access of an unauthorised person to the system (Almajali, Masa'deh
and Tarhini 2016). The inconsistent performance of the software that helps the company in
maintaining the overall purchase system also pointed as the risk for the process.
Cash disbursement system
The rules and regulation that is associated with the business of the company includes
certain inherent risk of the process of cash disbursement which might cause the concerns about
the security of the firm. The system of cash disbursement also gets affected by the adopting the
latest accountability by considering the faults in the overall system of tracking (Vardon, Burnett

10ACCOUNTING INFORMATION SYSTEM
and Dovers 2016). Moreover, poor accountability practices also creates a gap between the clients
and their functions that might leads to loss of financial benefits along with profitability. It also
consist of the risk that points out the checking the registers of the company along with returning
the cash vouchers of the overall business. Both purchase as well as sales activity are required to
be enhanced for mitigating the overall risk that are directly associated with the business.
Payroll system
Safeguarding the internal information of the company and failing it in primary location is
one of the inherent control weakness of the company. It also includes the data that are entered for
analysing the disputes for the business in their normal business operation. It also includes the
separation of the business activities for mitigating the internal control weakness (Wisna 2015).
The suppliers are involves in the overall process which deals with the stock for better
management in the system of purchases. It also helps in pointing out the hours of working that
are generally performed by the workers along with payment of the wages. The risk highlights the
track of timekeeping of the employees along with discrepancies in their overall payroll.
Conclusion
From the above study, it can be concluded that the accounting information system is the
effective way of analysing the system that are associated with the company. The effective
measurement of the business is also pointed by the purchase system along with preparation of the
invoices that consist of details of the products and services that would be required by the
business. The transaction that are legitimate in nature mainly includes the effective recording in
their books of accounts that helps in paying for the materials and verification of certain
documents. The Company is also required to file the amount of income tax that would paid to the
government in their normal course of business. The payroll system includes the total amount of

11ACCOUNTING INFORMATION SYSTEM
taxes that are paid by the employees to the government after every fiscal year. The system of
payroll mainly introduced by the process of hiring the employees by the human resource
manager. Therefore, the above mentioned process would help the company Adam and Co for
running their business in an effective way.