HA2042 Accounting Information Systems: Adam & Co Case Study Analysis

This case study examines the Accounting Information System (AIS) implemented by Adam & Co, an industrial product company located in Perth, Australia. The analysis focuses on the purchase system, cash disbursement system, and payroll system, including their respective system flowcharts. The study delves into the internal control weaknesses inherent in each system, such as over-allocation of stock in the purchase system, security concerns in the cash disbursement system, and data entry disputes in the payroll system. Furthermore, it identifies and discusses the risks associated with these weaknesses, such as unauthorized access, loss of funds, and disputes over wages. The case study provides a comprehensive overview of the AIS, offering insights into the operational processes and potential vulnerabilities within Adam & Co's financial management.

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 information which
highlights the effective information about the organisation. Adam and Co has been
taken into consideration for this particular study which points out the policies and
strategies of the discussed systems. Accounting information systems such as purchase
systems, cash disbursement systems and payroll systems have been discussed in this
study. Internal control weakness along with their risk has also been discussed in this
study.

2ACCOUNTING INFORMATION SYSTEM
Table of Contents
Introduction........................................................................................................................3
System flowchart of a purchase system............................................................................3
System flowchart of cash disbursement system...............................................................4
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.......................................................................................................................11

3ACCOUNTING INFORMATION SYSTEM
Introduction
Accounting information system is important for a business as it consist of certain
ingredients that process of a collection of data, processing the data along with
distributing the information which would be beneficial for the company. It consists of
functions that would be effective in the process of source documentation along with
making certain decisions that would be beneficial for the company. In this study, Adam
and Co has been considered that deals with certain products that are industrial in nature
and the company is located in Perth of Australia. Internal control weakness and risk has
also been described in the study.
System flowchart of a purchase system
The purchase system which is implemented in the business of Adam and Co
generally involves the products and services that are sold to the consumers in their
normal business activities. It consist of certain parameters that is to be introduced in the
business for pointing out the overall procedure of purchase that has been considered by
the company (Charron, K. and Raschke 2014). The actual system of purchase mainly
assists in the solving the problems that arise in their normal course of business
activities. The purchase system that is involved in the company generally introduced the
process by sending the details of the order that are being ordered by the customers. It
also includes the prices that would be charged to the customers for maintaining the
availability of the products within the business of the company. It also includes the
process of preparation of invoices that would be provided to the customers and clients
during the time of purchase the pointing out of effective measurement (Ceran, Gungor
and Konya 2016). The invoice consist of details of the products and services along with
their specification and their prices that points out the process of taking the requirement
details of the clients. The details are to be send to the respective customers that helps
in running the overall business in an efficient way. Therefore, the older products that
has arrived to the company earlier is required to be sold in the first preferences for
betterment of the business (Boučková 2015). The following figure mainly points out the
system flow chart of a purchase system of the company that is Adam and Co.

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Figure 1: System flowchart of a 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. Purchasing of raw materials is the step that starts with the
process of a purchase system. The manager who is appointed by the company has the
responsibility of confirming the orders which has been ordered by the selected clients of
the company in a previous time period (Otley 2016). The allocation of price is to be
managed by the process of managing the benefits along with pricing strategies in an
effective way. These are the process that are required to be carried out and pay
cheques are to be provided with the process of purchasing the materials that can be
seen from the above figure.
System flowchart of cash disbursement system
The process of cash disbursement system is also to be recorded in the financial
statement of the company along with ensuring the legitimate transactions. The functions

5ACCOUNTING INFORMATION SYSTEM
of accounts payable is to approve the vendor of the company for supporting the existing
documents along with approving the transactions of the actual payments with identifying
the issues (Rossi et al. 2016). It also includes the documentation of transactions for the
process of an invoice that are required to be prepared and provided to the clients. It act
as receipt of the merchandise and also points out the agreement of the job between the
selected parties. It also includes the process of recording of transaction that are to be
revalued within the specific price and act as a credit to the liability of the company. The
company is required to debit the liability that is associated with the company and the
cash that has been received is to be credited by the company (Khairi and Baridwan
2015). The clerk that is appointed by Adam and Co is responsible for preventing the
loss of cash from the business along with other process of documentation. The following
diagram mainly shows the system flowchart of cash disburse system which points out
the effective system of cash disbursement.

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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 cash
disbursement process is generally prepared by the managers and then it is transferred
to the payroll department which mainly provides the salaries to the employees of the
organisation (Hall, Millo and Barman 2015). The responsibility of the clerk is to prepare

7ACCOUNTING INFORMATION SYSTEM
the invoices that is disbursed the cash from the company along with preparing the
transfers of Adam and Co. It includes the total amount of tax that would be paid to the
government after a certain time period and the file for income tax is also to be
highlighted within their business (Tarmidi et al. 2014). The payroll department of the
company generally transfers the file which points out the rate of tax and payable amount
of income tax to the government.
System flowchart of payroll system
System flowchart of a payroll system mainly points out the effective relationship
between the various departments of a payroll system. It generally assist the company in
meeting their targets and goals in the overall time period along with maintaining the
balances of the organisation structures (Corona, Nan and Zhang 2014). The system of
a payroll is associated with the organisation which is generally responsible for payment
of salaries and wages of the business. The appointed clerk of the company that is Adam
and Co helps in maintaining the balances of the appointed employees of the company.
The employees of the company works on the basis of hours and the payment is made
on the basis of hours. The hours of working by the employees is to be multiplied with
the rate per hours which points out the total amount of payment that would be made to
the employees of the company (Chen et al. 2014). It also points out the effectiveness of
the taxation system for which the amount of tax is to be paid by the employees on their
rate of income and the organisation is also liable to pay the amount of income tax. The
company is using the computer terminal for connecting the overall payroll system for the
process of processing the data within the department. It also includes the disbursement
of the available vouchers for analysing the data of the employees and other tenures
(Bawaneh 2014). The following figure shows the flowchart of the payroll system that
highlights the overall structure of the system.

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Figure 3: System flowchart of a payroll system
(Source: Created by Author)
The above figure shows the system flowchart of a payroll system which includes
the receiving structure of the system. Adam and Co has the requirement of a gathering
of the funds which is to be distributed among the employees in the form of salaries and
wages (Özsözgün Çalişkan 2014). Pay week and pay month is associated with the
payslip that has been prepared by the company in their normal business operation. It is
the type of statement that points out the details of the wages that would be paid to the
employees. It is also includes the total amount of income tax that is to be paid by the
employee for their income that has been earned over the time period (Hein et al. 2015).
The backup of the pays are also included that is recorded in the statement after
completion of each tasks that has been allocated by the company.

9ACCOUNTING INFORMATION SYSTEM
Description of internal control weakness in each system and risk associated with
the identified weakness
Purchase system
The system of purchase is associated with the process of allocating the stock
that might result in the process of over allocation of the available stock. The
misplacement of the stock is also highlighted by the purchase transaction that mainly
occurs in the overall course of the business organisation (Caskey and Laux 2016).
These are the internal control weakness of the purchase system which also includes the
suppliers that includes the amount to be paid in advance. It also includes the risk that is
associated with the business for leading to the unauthorised access to the system of the
company. The association with the software mainly consist of inadequate backing up of
files which includes the data that are empirical in nature and the available vendors
would prevent the incomplete trails in an audit. These are the weakness and risk that
are required to be identified by the management of the company which help in
mitigating the risk for better management along with maintaining the overall profitably of
the business.
Cash disbursement system
This particular system includes different areas which mainly helps in the process
of developing and controlling the strength of the system. The concern of security might
be the internal control weakness which might not be regulated in their business
organisation (Ahmad 2014). Loss of fund is also another type of internal control
weakness along with the risk that points out the faults in the overall tracking system and
journals of the cash disbursement. It also includes the documentation of transactions for
the process of an invoice that are required to be prepared and provided to the clients. It
act as receipt of the merchandise and also points out the agreement of the job between
the selected parties. Cash department of the company might face certain issues with in
the business as accounts payable vouchers might hamper the sales activities along with
the transaction of the events. This system is vital for the company as it involves the
monetary transaction and the issues is to be solved at primary preference.

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Payroll system
It is the system that consist of information which are required to be safeguarded
for protecting the financial resources. The process of entering the data might occurs the
disputes that results in loss of financial information of the company along with
mentioning the internal control weakness (Dwivedi et al. 2015). Falsifying of the
information is also internal control weakness which might hamper the profitability of
overall course of business. The inclusion of risk in the system mainly affects the
timekeeping of the employees which might results in disputes in the wages and salaries
of the employees. The hours of working by the employees is to be multiplied with the
rate per hours which points out the total amount of payment that would be made to the
employees of the company. Moreover, the actions are to be taken by the business with
proper interest along with miscalculation on the installed computer system might lead to
losing the trust of the employees.
Conclusion
From the above study, it can be concluded that the system that is associated in
the process of accounting and its information system mainly holds the information which
are involved for the business. The purchase system that is involved with in the company
generally introduced the process by sending the details of the order that are being
ordered by the customers. The allocation of price is to be managed by the process of
managing the benefits along with pricing strategies in an effective way. The functions of
accounts payable is to approve the vendor of the company for supporting the existing
documents along with approving the transactions of the actual payments with identifying
the issues. The cash disbursement process is generally prepared by the managers and
then it is transferred to the payroll department which mainly provides the salaries to the
employees of the organisation. The system of a payroll is associated with the
organisation which is generally responsible for payment of salaries and wages of the
business.

11ACCOUNTING INFORMATION SYSTEM
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