Holmes Institute HA2042: Case Study Analysis of Adam & Co's AIS

This case study analyzes the accounting information system of Adam & Co, focusing on its centralized system across multiple terminals. The report details the company's expenditure cycle, including purchases from manufacturers in China, Vietnam, and Thailand. It examines the system flowcharts and descriptions of the purchases, cash disbursements, and payroll systems. The analysis covers internal controls and associated risks within these systems, providing an evaluation for the Managing Director. The case study emphasizes the importance of documentation, support, and training in implementing and maintaining an effective accounting information system. It also highlights the objectives of the system, such as protecting the firm from risks and meeting statutory requirements. The study uses flowcharts to illustrate the processes within each system, including inventory checks, order placements, cheque preparation, and payroll processing. The analysis concludes with an overview of internal controls and associated risks, with the goal of improving efficiency and minimizing errors. The case study adheres to the guidelines provided by Holmes Institute for the HA2042 Accounting Information Systems unit.

Running head: CASE STUDY- ADAM & CO
Case Study – Adam & Co
Name of the Student:
Name of the University:
Author Note

1CASE STUDY – ADAM & CO
Executive Summary
The business analyst of Adam & Co has prepared the report to analyze the
performance of the company. The characteristics and objectives of the system have
been highlighted. The system flowchart of purchasing system, cash disbursement
system and payroll system has been described.

2CASE STUDY – ADAM & CO
Table of Contents
Introduction...................................................................................................................3
System flowchart and description of purchases system..............................................5
System flowchart and description of cash disbursements system...............................6
System flowchart and description of payroll system....................................................7
Internal control and associated risk..............................................................................9
Conclusion....................................................................................................................9
Reference list..............................................................................................................10

3CASE STUDY – ADAM & CO
Introduction
Accounting Information System is a mechanism of collection, storage and
processing of accounting and financial data which are used for the purpose of
decision making by the makers of decision. It is a method based on computer for
tracking its accounting activities in relation to the resources of information
technology. The financial reports prepared are used by the internal management as
well as by external interested parties like investors, tax authorities and creditors
(Ceran, Gungor and Konya 2016). It is designed in a manner that supports all the
accounting activities and functions relating to financial reporting and accounting,
managerial accounting and tax and auditing. The commonly used modules of
accounting systems are financial reporting and auditing by most companies. One
such company is Adam & Co that follows a centralized accounting system for its
network of terminals across different locations. As its business analyst the
performance of the company has been analysed (Collier 2015). The company has its
source of inventories from China, Vietnam and Thailand manufacturers. The
expenditure cycle procedures has been described. The management of the
purchases system by the purchasing system has been elaborated. The cash
disbursement system is managed by the clerk and updates are made in the books.
The process of pay roll system followed by the company is explained. The evaluation
of the process, risk and internal control of its expenditure cycle for the Managing
Director has been prepared.
The implementation of the system have certain steps that are required to be
fulfilled. Several firms have started adopting effective cost accounting information
system based on cloud (Galliers and Leidner 2014). Most firms used to hire external
consultants from the software consultants or publishers who would have a good
understanding of the business. They help in the work by selecting and implementing
the desired configuration by incorporating all the parts into its consideration.
Synthesis of systems design
An analysis is conducted based on which there is creation of new systems.
The surrounding systems play an important role in it. The data that needs to be
fetched into the system and the process of handling it is described ( Gullberg 2016).
The information that needs to be fetched out of the system and the way it is to be
modified is illustrated. The input and output data should be determined for the
processing by the system. The selection of the program has to be appropriately
handled to conduct its process. The mechanism is structured with sample master
records and control files. It is designed in a manner which facilitates internal control
and provides the management with relevant information for decision making. The
characteristics of the system are meaningful, useful, relevant, current and reliable
(Guragai et al. 2015). For achieving it, the system is built in a manner where the
transactions are recorded on their occurrence and immediately made available for
the management.
Documentation
The documentation is prepared while it is designed. It is inclusive of
documents by the vendor and detailed instructions for the users that helps them to
handle every process which is organization specific. Most procedures and
documentation are online and they are helpful upon receiving instructions from the

4CASE STUDY – ADAM & CO
vendor of software (Krahel and Vasarhelyi 2014). Procedures and documentation
are the afterthought while the insurance tool and policy are used during the process
of training and testing before its launch. The testing of the documentation is done
during the training phase for the launch of system without any queries by its users.
Support
The managers and end users have continuous availability of support all the
time. The system upgrades adhere to a similar kind of process and all its users are
apprised of its changes, upgraded in a manner that is efficient. Certain firms limit the
money and time they spend on its design, training, analysis and documentation
(Medina-Quintero, Mora and Abrego 2015). They further move directly into the
selection of software and implementation. In case of receiving a detailed analysis
with the use of sufficient time on its analysis, implementation and support.
Tools
Accounting information system is assisted with available online resources for
its strategic planning. Financial forms and information systems help in concluding the
particular needs of every organization along with responsibilities being assigned to
the principles that have been involved (Yigitbasioglu 2016).
Training
The users are trained with the procedures before the launch. A trainer has
been appointed who assists the users about the handling of procedures. The
procedures have to be updated during the process of training as the users keep
describing their specific circumstances (Nan and Wen 2014). The design is also
modified by incorporating the additional information. The procedure is performed with
the trainer as well as the documentation.
Characteristics-
 It satisfies the needs of information for both its internal as well as external
users of information. The internal users include the managers at different
levels for the purpose of control and planning. The standard definitions of
accounting terms are followed to assure consistency in the information
recorded. The external users include vendors, stock exchanges, customers,
investors and many more.
 The mechanism deals with financial transactions that can be shown having
monetary value.
 It is a well-structured and simple system involving procedures and principles
for accounting its data. The objective is to protect the interests of vendors,
customers, general public and investors.
 The data for the mechanism is obtained from internal sources. Therefore, the
databases are integrated, controlled and well-defined.
 It makes use of historical data and includes future data as forecasts and
budgets.
Objectives-
 Protecting the firm from the potential risks that could arise in future from
improper use of accounting data

5CASE STUDY – ADAM & CO
 Meeting the statutory requirements of the organization
 Providing reliable information on accounting to its various users
System flowchart and description of purchases system
Purchases system is a mechanism for the process of purchasing products
upon identification of low levels. It involves purchasing upon requisition and through
purchase order using product payment and receipt. The key components of these
systems are the inventory management in which they review the existing stock and
helps the company in determining the further purchases to be done. It also helps to
ascertain the quantity and time frame of purchasing it. The blue prints are created by
the clerk and forwarded to the respective departments (Nurhayati and Mulyani 2015).
The receipt of goods are verified with the digital purchase order along with the
packing slip by the receiving clerk. The blue prints are prepared manually on the
reports received (Prasad and Green 2015). The goods are shelved and the ledgers
are updated using the computer terminal. After receiving the invoice, the receiving
report is pulled from its temporary file and the documents are reconciled. The
ledgers, accounts are updated digitally by the clerk. The relevant documents are
forwarded to the department of cash disbursement.

6CASE STUDY – ADAM & CO
Inventory check
Placing of order
upon detecting low
levels of quantity
Printing of hard
copies and
recording in the
purchase order file
Receiving and
inspection of
goods by the clerk
Reconciliation of
documents
Receipt of documents
by cash disbursement
department
System flowchart and description of cash disbursements system
It is a mechanism of cash outflow for payments done in return for the goods
provided. It is also a disbursement of cash on refund made to customers that has
been recorded as a decrease in sales. The cash disbursement clerk does the filing of
documents after receiving the documents from the department of accounts payable.
(Silviu-Virgil 2014). The cheque is prepared by the clerk for the department of
accounts payable and forwarded to the treasurer for signing. The cheque is mailed to
the vendor (Usenko et al. 2018). The updates in the cheque register, subsidiary
ledgers and accounts payable are made by the clerk from the computer terminal.
The function of cash disbursement is effective when it includes proper
documentation and is recorded in the financial records of the company (Syaifullah
2014).

7CASE STUDY – ADAM & CO
Documents received from the accounts payable department
Signing of the cheque by the treasurer and mailing to the vendor
Preparation of cheque by the clerk
Filing of relevant documents by the receiving clerk
Updation of books of accounts by the clerk
Filing of documents by the clerk until the due date of payment
System flowchart and description of payroll system
Similar to other businesses, Adam & Co has a payroll system installed by
which it records the working hours of its employees. It is an automatic process that
assists in complying with the tax and legal requirements along with making the
payments to its employees in an easier manner. The time cards are reviewed by the
supervisors for correctness and submitted to the department of payroll (Trigo, Belfo
and Estébanez 2016). It prepares reports that help the management in managing its
expenses relating to labour. It generates reports of salaried and hourly employees. It
eases the process of reporting by having templates created which the managers to
easily and quickly search for its costs relating to the period. The inputs are forwarded
to the central system for printing of copies, cheques and posting into the digital
records. The system makes calculations of the amount that is owed by the company
to its employees on the basis of factors like working hours, hourly salaries or wages
and the holidays taken by them in the period of payment. It measures and makes
adjustments to arrive at the gross pay amount (Upadhaya, Munir and Blount 2014).
The time cards are filed by the clerk and sent to the supervisor for reviewing. It
provides the employees with cheques along with a summary of information that has
been used for calculating the gross and net wage.

8CASE STUDY – ADAM & CO
Recording of work hours on time cards
Printing of copies of pay cheques and posting in digital records
Input of time card data by the payroll clerk into the system
Reviewing of time cards and submission to payroll department
Filing of time cards in payroll departments
Sending of documents to the accounts payable document
Filing of time card in the payroll department and sending the cheque to supervisors

9CASE STUDY – ADAM & CO
Internal control and associated risk
The cash disbursement system helps the company to reduce its supply cost,
administrative cost and increase its efficiency. Therefore, decrease human error as
well as minimize the shortages. The purchases system helps to simplify the tracking
of orders and make the process of managing the purchase budgets easier by quick
preparation of expenditure reports. It helps the company in controlling the cash
outflows. It also ensures the necessary purchases that are to be done at affordable
prices. The outputs constitute the amount of inputs that are required for the process
of production. Disbursement of cash is generally detected in the accounts payable
system. However, it has also been found to be disbursed by use of petty cash and
payroll systems. A system of disbursement is required by all firms for efficient and
secure handling of cash payments. Cash payments are processed through the
accounts payable of a company. The internal control plays an important role in this
process and helps to ensure legitimate cash payment transactions. The function of
accounts payable has the responsibility of approving the payments of vendors and
transactions of creditors only if the supporting documents exist. As the transactions
are recorded upon having supporting paperwork the chances of invalid transactions
get reduced. Generally firms incorporate the system software for the payroll process.
It processes information and calculates the amount to be paid. It also helps in
checking facts like vacation balances, headcounts and earnings of employees.
Conclusion
The report helps to conclude the analysis that has been done by the business
analyst of Adam & Co. The accounting information system has been described with
its main functions been highlighted. The synthesis of system design, support,
documentation, tools along with training are its main components that help to make
the mechanism successful in an organization. The system of purchase system has
been described and the process by which it helps to determine the inventory
management for the firm. The disbursement system of cash also been discussed.
The payroll system adopted by the firm has been explained. The reports generated
by the payroll system helps the management in taking appropriate decisions.

10CASE STUDY – ADAM & CO
Reference list
Ceran, M.B., Gungor, S. and Konya, S., 2016. The role of accounting information
systems in preventing the financial crises experienced in businesses. Economics,
Management, and Financial Markets, 11(1), pp.294-303.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Galliers, R.D. and Leidner, D.E., 2014. Strategic information management:
challenges and strategies in managing information systems. Routledge.
Gullberg, C., 2016. What makes accounting information timely?. Qualitative
Research in Accounting & Management, 13(2), pp.189-215.
Guragai, B., Hunt, N.C., Neri, M.P. and Taylor, E.Z., 2015. Accounting information
systems and ethics research: Review, synthesis, and the future. Journal of
Information Systems, 31(2), pp.65-81.
Krahel, J.P. and Vasarhelyi, M.A., 2014. AIS as a facilitator of accounting change:
Technology, practice, and education. Journal of Information Systems, 28(2), pp.1-15.
Medina-Quintero, J.M., Mora, A. and Abrego, D., 2015. Enterprise technology in
support for accounting information systems. An innovation and productivity
approach. JISTEM-Journal of Information Systems and Technology
Management, 12(1), pp.26-44.
Nan, L. and Wen, X., 2014. Financing and investment efficiency, information quality,
and accounting biases. Management Science, 60(9), pp.2308-2323.
Nurhayati, N. and Mulyani, S., 2015. User participation on system development, user
competence and top management commitment and their effect on the success of the
implementation of accounting information systems. European Journal of Business
and Innovation Research, 3(2), pp.22-35.
Prasad, A. and Green, P., 2015. Organizational competencies and dynamic
accounting information system capability: impact on AIS processes and firm
performance. Journal of Information Systems, 29(3), pp.123-149.
Silviu-Virgil, C., 2014. The importance of the accounting information for the
decisional process. THE ANNALS OF THE UNIVERSITY OF ORADEA, p.591.
Syaifullah, M., 2014. Influence Organizational Commitment On The Quality Of
Accounting Information System. International Journal of Scientific & Technology
Research, 3(9), pp.299-305.
Trigo, A., Belfo, F. and Estébanez, R.P., 2016. Accounting Information Systems:
evolving towards a business process oriented accounting. Procedia Computer
Science, 100, pp.987-994.
Upadhaya, B., Munir, R. and Blount, Y., 2014. Association between performance
measurement systems and organisational effectiveness. International Journal of
Operations & Production Management, 34(7), pp.853-875.

11CASE STUDY – ADAM & CO
Usenko, L.N., Bogataya, I.N., Bukhov, N.V., Kuvaldina, T.B. and Pavlyuk, A.V.,
2018. Formation of an integrated accounting and analytical management system for
value analysis purposes. European Research Studies, 21, p.63.
Yigitbasioglu, O., 2016. Firms’ information system characteristics and management
accounting adaptability. International Journal of Accounting and Information
Management, 24(1), pp.20-37.