Analysis of Bell Studio's Business Processes and Internal Controls

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Strategic Information Systems for Business and Enterprise
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Executive summary
Bell Studio is an Adelaide based wholesaler of art supplies wherein the employment of business
analyst has been done. In this report, the understanding of the major activities and processes that
is present in the company will be explained and made understood to the management. The
process present in the Bell Studio is the processes that will be present in almost all types of a
similar organisation. Understanding of the business process steps by which the activities will be
managed accordingly and which will help in decision making will be specified in the report. The
system requirement and processes that will be included in the company's operations include
production process, payroll system, and cash disbursement system. The proper functioning of the
departments will be necessary to achieve the required objective. As the business analyst of the
company the analysis has been made for the processes, internal control and risks involved and
report of the same will be provided to the management.
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Table of Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Purchase system..........................................................................................................................................5
Weakness of the Purchase System...........................................................................................................6
Cash Disbursement System.........................................................................................................................7
Weakness of Cash Disbursement System................................................................................................9
Payroll System...........................................................................................................................................11
Weakness of Payroll system..................................................................................................................12
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15
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Introduction
In this report, the overall analysis of the processes in the organization and functions performed
by the company has been specified. The processes of the organization are further divided into
various parts and sub-parts. The report is made to gain an understanding of the specific processes
and its sequence of subparts followed by Bell Studio. All the operations and processes of the
company are interrelated to each other thus it is important to bifurcate and understand each and
every process to gain the efficiency and effectiveness in the organization. Majorly three
processes of the organization have been analyzed in the given report and internal control
weakness which is present in these processes have been explained and identified. Understanding
of these will help in the proper functioning of the business operations and will benefit the
organization in the long run. Understanding of the operations has been made on the basis of the
System Flowcharts or Data Flow Diagram. This will help in achieving of desired objectives &
goals of the business.
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Purchase system
The purchasing system is the system in the organisation which focuses on buying products which
are required in the organisation. It includes all the activities that are undertaken by the
purchasing department (Bragg, 2019). Purchase system is followed so that the company can
fulfill the needs of the raw material requirement by the production department.
Purchase system has been implemented by the Bell Studio and a particular process is being
followed by the purchasing department in that purchase system. The purchase process of the
company is started by checking the inventory subsidiary ledger by the purchasing clerk. After the
check, the vendor is selected by the clerk and the digital purchase order for the same is prepared.
After the purchase order is a prepared printout of the same is taken where one copy of the same
is sent to the vendor and the other to the other is kept with the purchasing department. Once the
goods have arrived the goods are reconciled and inspected by the receiving clerk with the digital
purchase order and packing slip. Also, the preparation of two manual copies is done by the
receiving clerk for a different purpose. Thus the overview of the purchase system of bell studio
used as depicted in the flow chart is as follows:
 Inventory subsidiary ledger to be checked
 Vendor selection from the vendor file
 Digital Purchase order is prepared
 Hard copies printed (2 copies)
 Receiving clerk inspect goods
 Reconciliation of items by receiving clerk with a digital purchase order
 Manually hard copies prepared
 Record updated in inventory subsidiary ledger
 Sending of invoice and receiving of report & purchase order
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Weakness of the Purchase System
Weakness in the purchase system can lead to major problems in the organisation as the
objectives of the organisation may not be achieved timely. Thus it is important to identify the
weakness in the internal control of the purchase system and rectify the same to avoid any
mishappening (Jane, 2019). Also, there are various risks that are involved with the weakness
which could harm the organisation. Some of the weakness in the purchase system that needs to
be checked and the risk associated with the same are:
 The purchase system is made in a way which is beneficial only if the company is engaged
in direct selling of products without any customisation, installation of various different
products and assembling various items together. Thus the internal control weakness is
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that if the purchased product requires being customised, modified or assembled properly
then the system would not be beneficial. Thus there is a risk of orders not properly
fulfilled as per the specifications of the customers.
 The vendor is selected on the basis of the vendor file thus preference is given to the past
suppliers or vendors but new vendors are not given preference. Thus internal control
should consider all types of vendors suitable for making the purchase but there is a
weakness in the internal control as preference is given to the vendors in vendor file only.
Due to this, there is a risk of overpaying to the vendor as there might be vendors who are
offering lower prices, faster delivery but not considered due to the internal control
system.
Cash Disbursement System
Cash disbursement system is a system which effectively and efficiently manages/handles the
cash payments of the company along with the cash account, accounts payable accounts and other
related accounts (Gish, 2019). Cash disbursement system helps in proper documentation of the
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InventorysubsidiaryledgertobecheckedVendorselectionfromthevendorfileDigitalPurchaseorderispreparedHardcopiesprinted(2copies)ReceivingclerkinspectgoodsReconciliationofitemsbyreceivingclerkwithdigitalpurchaseorderManuallyhardcopiespreparedRecordupdationininventorysubsidiaryledgerSendingofinvoiceandreceivingofreport&purchaseorder

transactions in the organisation. In Bell studio cash disbursement system follows the following
steps:
 Receiving the document from the accounts payable department
 Filing of the document by cash disbursement clerk until the due date
 Preparation of cheque for the invoiced amount
 The signing of cheque by the treasurer
 Mailing of the signed cheque to the vendor
 Updation of all the relevant accounts and document
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Thus it can be seen in the cash disbursement system that after the documents are received from
the accounts payable department and other such processes cheque is prepared for the invoiced
amount and signed by the treasurer after due investigation. After the cheque is made the same is
mailed to the vendor and information is updated in the accounts like cheque register, accounts
payable subsidiary register, etc.
Weakness of Cash Disbursement System
Cash disbursement system in Bell Studio has various problems which need to be settled by the
company. There is a weakness in the internal control system which is to be sorted otherwise
would lead to exposure of risk for the company. If such risks capitalise then it can cause
problems for the company (Lacoma, 2019). Following are some of the weakness in the internal
control of cash disbursement system of the company:
 Information for cash disbursement is received directly from the accounts payable
department to the cash disbursement department without any higher authority verifying
the same. This sort of improper control with respect to operations might lead to frauds
among the department thus causing losses to the company.
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 The method of reporting and maintaining of cash disbursement is evenly followed for all
kinds of transactions that occur in the organisation thus leading to rigidity and if there is
any development or adoption of new technology then its implementation becomes
difficult. Also in some cases when the cash transactions in the company are different
from the normal course then, in that case, this system will not be able to adapt and there
is a risk of misreporting of transaction.
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Payroll System
Payroll system is a system in the organisation which focuses on the payment to be made to the
employees of the organisation during the employment as well as after the employment. Payroll
system also focuses on the review of the duration of working of the employees on a daily basis.
The time card is prepared by the supervisor to keep a check on the employees towards the
engagement for work of the employees (hrpayrollsystems, 2019). Thus the payroll system is an
important system in any organisation because it helps in giving an overview of the employees of
an organisation. Bell studio employees also record their hours worked on the time cards and the
same is reviewed by the supervisor. Bell studio also uses the centralised computer terminal to
post the inputs collected from various areas relating to employees. Processing department using
computer terminals processes the time card data, print hard copies and posts the digital records of
the employees (Liviu, 2014). After the overall review of the information of employees, cheques
are prepared and sent to various supervisors for proper review and distribution of the same to the
employees of their departments. The copy of the same is sent to the accounts department for
recoding the same. To sum up the payroll system of the organisation following points are
covered:
 Recording of time card of hours worked
 Review of time card by the supervisor
 Submission to the payroll department & data processing department
 Input data in time cards
 Delivering the data processed to respective departments
 Finalising the payroll register by respective departments
 Preparation of disbursement voucher
 Making of cheque and depositing of the amount in the bank
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Weakness of the Payroll system
There are several weaknesses in the payroll system which is to be identified by the Bell Studio
and rectification has to be done for the same (Harper, 2019). The risk associated with such
weakness is also to be identified as the same cause several problems if such risk is capitalised in
the organisation. Following are the internal control weakness and the risk associated with the
same in the payroll system of the Bell Studio:
 There is a weakness in the internal control regarding the checking of time cards as there
is no proper system which crosses verifies the records maintained regarding time cards
thus leading to the frauds by employees. There is a risk that employees might get engaged
in fraudulent activities thus leading to loss to the organisation in monetary terms.
 Except for time cards, there are no other means to verify the employee timings regarding
login and log out in the company premises. Thus employees can fraudulently change the
time and there is a risk that productivity would be affected by the same. The company
should implement biometric devices along with the time cards which would ensure that
the employee is working in the organisation in a proper way.
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