HA2042 - Adam & Co Case Study: Accounting Information Systems Analysis

This case study examines the accounting information systems of Adam & Co, a large manufacturing organization. It details the business processes of the purchase, cash disbursement, and payroll departments, illustrating daily operations with system flowcharts. The study identifies internal control weaknesses within each department and assesses the associated risks, such as inaccurate data, supplier issues, and accountability problems. The analysis covers the flow of information and documents, highlighting potential vulnerabilities and suggesting areas for improvement in Adam & Co's accounting practices. Desklib offers a variety of study tools and solved assignments for students.

Running head: ACCOUNTING INFORMATION SYSTEM
Accounting information system
Name of the student
Name of the university
Authors note

1ACCOUNTING INFORMATION SYSTEM
Executive summary
The study assignment discusses about the business process of Adam & co which is a big
organisation dealing with manufacturing of goods and services. The company describes the
work process of purchase department, cash disbursement department and the payroll
department as well. The daily operations are described with the help of the system flowchart.
Apart from this the basic risks related to internal control weakness are also described here
with a suitable conclusion at the end.

2ACCOUNTING INFORMATION SYSTEM
Table of Contents
Introduction....................................................................................................................3
Discussion......................................................................................................................3
System flowchart of purchase system........................................................................4
System Flowchart of Cash disbursement system.......................................................6
System flowchart for payroll system..........................................................................9
Internal control weakness of purchase system.........................................................10
Risks of purchase system.........................................................................................11
Internal control weakness of cash disbursement system..........................................11
Risks related to cash disbursement process.............................................................11
Internal control Weakness of payroll system...........................................................12
Risks of payroll systems...........................................................................................12
Conclusion....................................................................................................................13
References....................................................................................................................14

3ACCOUNTING INFORMATION SYSTEM
Introduction
The above assignment report discusses about role of the business analyst of “Adam
&co” which is a Perth based organisation. They deal with the process of wholesaling of
industrial appliances. They also manage their inventory globally specifically in Thailand,
china and Vietnam. The company have three department namely purchase department, cash
disbursement department and payroll department. Each department takes care of certain roles
and responsibilities. The each department have different sub department which are managed
by specialist people step by step. The study report discusses activities of each department
with flow chart as well as internal control weakness of each department and risks associated.
Discussion
The overall process of the company is maintained by different department such as
purchase department, cash disbursement department and payroll department. Hence the
operation of each department are showcased with the help of system flowchart (Kempton et
al.,2015). It is a technique which helps to segregate each and every part of the operations and
prepares an effective outcome. These parts are shown below-

4ACCOUNTING INFORMATION SYSTEM
Purchase department
de
departme
Purchasing clerk checks inventory
Receiving department
Inspects digital purchase order
Clerk checks the goods and update inventory
Accounts payable clerk
Clerk updates ledger inventory control
System flowchart of purchase system
The purchase system is considered as an important department to deal with. Here
there are various sub departments which are operated by different specialised people. The
procedure works exactly like the supply chain management cycle technique. The process
starts with the purchase clerk who collects and check all the inventory subsidiary ledger

5ACCOUNTING INFORMATION SYSTEM
which is collected by him. Then he is responsible to entry each and every transaction to the
computer system every morning. On the other hand the company had tied up with different
vendors who quench all the demand of the company. For example they are responsible to
supply raw materials and mantainence of quality overall. Hence when the demand falls the
clerk selects vendor from every available vendors and prepares a digital purchase order. Since
the process is fully digitalized and system oriented, therefore it is expected that there are
minimum loopholes. The clerk prints copies of the purchase order of which one is kept by the
vendor and the other one is sent to the purchase department. After collecting the purchase
order the department cross checks it and records the purchase order transactions to the
purchase order file. In this way they keep track of all the purchase order on a continuous
basis. The digital order thus provided by the recipient department. The receiving department
is managed by the recipient clerk who inspects the collected digital purchase order and
reconciles the packing slip (Flanagin et al., 2014). After the receiving department collects the
ordered products they make two copies of the receipt reports. The next process is shelving the
products. Adam & co have their own warehouse where arrived goods are kept. The clerk
them shelves those goods and initially update the inventory. These goods typically includes
raw materials. When the company asks for shortage of materials and the receiving clerk
despatches those materials to the manufacturing department as per requirement. The next
process is associated with the accounts payable clerk who files the Invoice for the company.
At the same time the clerk prepares a hard copy of the purchase order and also updates the
digital payment purchase ledger. Hence this process helps to maintain all the documents and
update the subsidiary ledger. In the last process the clerk is used to maintain all the databases
relating to invoice, recipient report and the purchase order in order to maintain the overall
cash disbursement.

6ACCOUNTING INFORMATION SYSTEM
Hence in this way the purchase department looks to maintain the system periodically
and after every financial. This process is repeated every time one after another. There is no
jump in step. Thus the company purchase department initiates all these processes and this is
why they have successfully maintained the process related to the process. On the other hand
the flowchart system will be helpful in determining the overall systems and procedures of the
whole department.
System Flowchart of Cash disbursement system
Another main department which plays an important role in Adam & co is cash
disbursement department. Most of the cash related to the new purchase of materials and for
various other areas where cash is required is disbursed from this department. Therefore this
department is very much essential to the company. Therefore the work system of this
department is also run through some systematic part by part way. These process is shown
with the help of the system flowchart.

7ACCOUNTING INFORMATION SYSTEM
Cash disbursement system
de
departme
Clerk prepares cheque and sent it to vendor
Cash disbursed and verified with cheque
Clerk checks the goods and update inventory
The cash disbursement system is one of the busy systems of the company. Here after
receiving all the documents from the accounts payable department the basic procedure starts.
In the first step the cash distribution clerk files all the documents and cross check all the
documents which have been sent for payment option. On the other hand the cash
disbursement is only done from the clerks end (Lee et al., 2018). Hence on the due date the
clerk prepares an invoice in order to disburse the cheques. In the third step the cheques are
sent to the treasurer. He signs those cheques and allots money for payment of those checks.
After the disbursement of these cheques it is important for the company management to
update the inventory by recording all those transactions with the registration number of those
cheques. This process helps the company to always maintain the updated database and to
record all the transactions as per the due date. By following this process the company
management ensures that the inventory is always updated. Lastly after all the proceedings are

8ACCOUNTING INFORMATION SYSTEM
completed it is important to the management to keep records of those transactions. Thus they
file all the invoices, copy of purchase orders, report documents, copy of cheques both hard
and digitalized in the department as a proof of this transaction. After finishing this whole
cycle, the process returns back to the first stage and the same steps are repeated time after
time.
Thus it can be said that Adam &co by maintaining all these steps will properly
maintain all the areas and therefore chances of mistakes are minimized.

9ACCOUNTING INFORMATION SYSTEM
Payroll system (payroll department)
Payroll clerk inputs card details the card details
Payroll clerk checks the time card
Sends employee paycheques to the superiors
System flowchart for payroll system
The employees of Adam & co have certain cards where they record the time they
have spent on working. Every day the supervisors review those time cards and submit the
same to the payroll department. In the second stage the Company have their system
connected with the payroll process which is located in the data processing department. Hence
all the required data is stored over the system. This whole process is managed by the payroll
clerk who inputs all those data related to payroll on a regular basis in the time card. In the

10ACCOUNTING INFORMATION SYSTEM
third stage they also check the time card files and make hard copies of those data. The payroll
clerk sends those data files to the required department. Apart from this the basic paycheques
are supervised and sent to the respective employees of each department. Lastly the payroll
clerk checks the whole procedure and among it the payroll clerk sends one copy to payroll
registrar of the accounts payable department and the next one is sent along with time card in
the payroll department. The accounts payable clerk also makes a disbursement voucher and
sends the same to the payroll registrar in the general ledger department. Lastly the payroll
clerk writes a cheque to the entire payroll system and deposits the same to the bank where the
accounts clerk collect the same sends it to the accounts payable department. This process is
repeated in every financial year in order to maintain the efficiency of the process.
Internal control weakness of purchase system
The basic internal control weakness which is found in the case of purchase system of
Adam & co are as follows-
 The stock are not independently checked with that of the purchase department. Hence
overstocking is a common fault occurred due to this mishap.
 Often the order sequences are not maintained properly. Thus the cancelled orders are
often misplaced and no purchase transactions occur.
 The companies select the suppliers based on past reputation rather choosing them by
different factors like price, terms and distribution time.
 All incoming goods including fixed assets are not cleared through goods inwards or
receiving department.
If any discrepancy occurs in this case then due to the absence of the goods inwards manager
the problem remains unsolved.

11ACCOUNTING INFORMATION SYSTEM
Risks of purchase system
Inaccurate data
In order to make sound procurement decisions, organisations need some accurate and
reliable data related to the inventory management. Hence the procurement challenges needs
potential impact on the company directly. Similarly the management of Adam & co also
needs to have sufficient data to generate exact outcome. .
Supplier related issues
Adam & co backs their suppliers in order to get the resources. Hence it is important
to choose the correct supplier who can deliver all the requirements (McCombs et al., 2014).
Internal control weakness of cash disbursement system
Accountability
It is a process which refers to the security of internal control as well as to understand
the misconduct and mishaps. Hence in the case of Adam & co many types of frauds can
occur. Hence the internal control will be related to the internal tracking systems and use of
poor accountability methods. This can look to go for unscrupulous behaviour.
Continual adaptation issues
The cash disbursements are made in the same way for the organisation. This process
will implement new technological change where the cash moves. The government regulations
will also help in implementing the process. The same technique could be implemented in the
case of Adam & co in order to outdate the strategies.