HI5019 Strategic Information Systems: Bell Studio Case Study

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HI5019
Strategic Information
Systems for Business and
Enterprise
Student name:
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Executive Summary
Bell Studio is an art supplier company based in Adelaide. We source our inventory items
from a variety of manufacturers from Japan, Australia, China & New Zealand. To better
manage our systems across different locations, we have centralized our accounting system.
This report provides an overview of the expenditure processes at Bell Studio. The report
contains data flow diagrams for the purchases system, cash disbursements system and payroll
system which enable the reader to understand how the data is passed into the system for
processing and operation. To visually lay out the system processes, system flowcharts have
been prepared. As a business analyst, the weaknesses in the systems have been identified and
possible risks associated with them have been highlighted in the report.

Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Data flow diagram of purchases and cash disbursements systems............................................5
Data flow diagram of payroll system.........................................................................................7
System flowchart of purchases system......................................................................................9
System flowchart of cash disbursements system.....................................................................10
System flowchart of payroll system.........................................................................................11
Weaknesses and risks in the system.........................................................................................12
Purchases system..................................................................................................................12
Cash Disbursements System................................................................................................13
Payroll system......................................................................................................................14
References................................................................................................................................15

Introduction
For this assignment a case scenario has been provided where I am employed as a business
analyst at Bell Studio which is an Adelaide-based wholesaler of art supplies. The case study
provides a description of the subsystems of Bell Studio. The purchase system, cash
disbursement system and the payroll system of the organization were then studied and
diagrams were constructed which gives an overview of their working structure. Data flow
diagram is a method of laying out how the information flows in a system visually. It does not
contain any loops and has no control flow. For the processes in Bell Studio, DFDs will be a
suitable way to understand how information flows in the system. Any system has some risks
associated with it and proper analysis of the sub-systems was carried out such that the
weaknesses associated with it could be analysed. The report provides the data flow diagrams
for the systems in Bell Studio along with their system flow diagrams in order to better
understand their functionality. The risks in the system have been identified in the report
which have been evaluated on the basis of the identified weaknesses in the system. The
system can be enhanced with the use of proper verification techniques which will also
improve the authenticity features of the system.

Data flow diagram of purchases and cash disbursements systems
Figure 1: DFD of purchasing system and cash disbursement system
The purchasing clerk checks the inventory each morning by the computer terminal. If he
finds that the quantity of certain items is low, a vendor is selected from the list of available
vendors and a digital order is prepared. One copy of the order is sent to the vendor and other
to the purchasing department. Upon receiving the goods, the receiving clerk checks the goods
against the purchase order and makes sure that the received order is correct. The clerk then
generates a receiving report and sends a copy of the report to the inventory warehouse where
the new items are also added to the inventory. In the cash disbursement system, upon
receiving invoice by the accounting department, the cash disbursements clerk will file the
papers until their deadline for payment comes. The details are sent to the trustee who signs
the cheque and sends it to the seller.

Data flow diagram of payroll system
Figure 2: DFD for Payroll system
The employees at Bell studio record their working hours on time cards which are submitted
for review at the payroll department after verification by the supervisors. The payroll clerk
enters the data into a central payroll system located in the data processing department. The
clerk then sends the employee pay cheques to the employee supervisors for verification and
distribution. The payroll clerk also sends one copy of the payroll register to the accounts
department where the register is reviewed and a disbursement voucher is prepared. The clerk
at the accounts department writes a cheque for entire payroll which is deposited at the bank.

System flowchart of purchases system

System flowchart of cash disbursements system
Figure 3: System flowchart of cash disbursements systems

System flowchart of payroll system
Confirm Pay
Paysheets
Calculate Pay
Set Up Payroll Tables Set Up EmployeesSet Up HRMS Tables
Produce ReportsDistribute to General Ledger
Payroll Reports
Advices
Checks
Payroll Reports
Figure 4: Payroll system flow diagram

Weaknesses and risks in the system
Purchases system
Weaknesses and associated risks:
 The purchasing clerk sends a copy of the purchase made to the purchasing department
before the goods arrive i.e. before they have been actually purchased. In case a vendor
rejects the order or is short of supplies himself, the purchasing clerk would have to
contact the purchasing department and ask them to roll back the changes. If the
changes are missed, the accounts of the organization would produce incorrect
financial statistics.
 The system does not involve any ordered sequence and does not include a list of
cancelled orders which can increase a risk of orders being misplaced.
 An independent checking body on the purchases against ordering should be allocated
for proper verification.
 The purchasing clerk checks the inventory each morning and makes an order if
required. Instead of a clerk checking for the inventory each morning the ordering
system could be automated such that order are placed at set intervals or automatically
according to the inventory conditions. If not this, the system could generate an order
for review by the clerk which could save time for ordering. The system which is being
currently being used can be erroneous as the clerk might miss out checking the
inventory properly.

Cash Disbursements System
Weakness and associated risks:
 The cash disbursement system does not have a governing body to keep a check on the
process which can lead to the misuse of power in the department. Dealing with cash
involves various threats and other frauds which is the main reason there should be
security in the processes and the controls of the system for proper tracking.
 The system at Bell Studio is not very much flexible. A cash disbursement system is
bound to change with the change in trade laws or some changes made by the
government. A lot of paperwork is being done in the process which should be done in
a way that it can accommodate future changes.
 Before sending the cheque to the vendor the accounts department does not verify if
the vendor has accepted the order. This might result in paying the vendor
unnecessarily. Before the cheques are mailed to the vendors the accounting
department must verify about the order from the good receiving department or contact
the vendor to check if they have approved the order.
 After the generation of employee paycheques, the clerk sends those cheques to the
department supervisors. The clerk thus has access to all the cheques which is not a
very secure way to transfer the salaries. Instead of this, the organization could wire the
salary amount directly to the employee’s bank account.
 A person autonomous of the cash distribution process should perform the bank
reconciliation. The bank reconciliation must have a bank statement evaluation and
check images returned for odd transactions with the payslip. Where essential, any odd
pieces should be reviewed and examined.

Payroll system
Weaknesses and associated risks:
 Before the paycheques are distributed, the system should produce a report for proper
scrutiny. A preview of the cheques will ensure that the employees are paid according
to their working hours and the amount is justified.
 The accounts department must allocate an employee to conduct a payroll audit such
that frauds in the payroll system can be detected quickly. This will also ensure the
identification of employees if they are engaged in fraud activities if any.
 The supervisors are required to review the time cards of their employees and it can
be a tedious task to review time data for each employee. Supervisors might not be
able to verify data correctly for each employee and it might not always be correct
which will lead to generation of inaccurate paycheques. An employee working for
lowers hours might get the same salary as the employee who is working for a longer
duration.
 The time card system is not the best way to record employee’s working hours.
Employees might exchange timecards to falsify their working hours which will lead
to inaccurate data generation. The probability of this happening is quite high
specially if the timecard verification procedures are weak.
 One clerk is assigned the responsibility of entering the time card data to the payroll
system which is an open invitation to embezzlement as there is no separation of
tasks in the internal control of the system. As the timecard verification process is
already weak an employee might keep getting payed even when he/she is not even
attending office or doing the job properly.
 Ghost-employees and fictitious data could be easily generated and when a number of
such employees will exist in the system, it will highly affect the accounts of the
organization.