HI5019 Strategic Information Systems: Bell Studio Case Study Analysis

This case study analyzes Bell Studio's expenditure cycle, evaluating processes, risks, and internal controls within its purchase, cash disbursement, and payroll systems. The analysis includes data flow diagrams and system flowcharts to illustrate the processes. The study identifies internal control weaknesses and associated risks within each system, suggesting areas for improvement. The case study covers various aspects of the expenditure cycle, including the purchase order process, cash disbursement procedures, and payroll processing, providing a comprehensive overview of the organization's financial systems and potential vulnerabilities. The document also highlights the importance of effective internal controls to mitigate risks and ensure the efficient operation of these critical business functions.

Strategic Information Systems for Business and Enterprise 1
Strategic Information Systems for Business and Enterprise (Bell Studio
Case Study)
Student
Course
Tutor
Institutional Affiliations
State
Date

Strategic Information Systems for Business and Enterprise 2
Strategic Information Systems for Business and Enterprise (Bell
Studio Case Study)
Executive summary
The purpose of this document is to analyze Bell Studio organization’s expenditure cycle
and evaluate the processes, risks and the internal controls for the expenditure cycle. In doing so
the document examines the three critical systems that is composed of the expenditure cycle
including the purchase system, the cash disbursement system and payroll system. Along with
that, various threats associated with each system is also discussed in the document. The analysis
suggest some improvements that are necessary for the organization. The structure of the paper
include: the introduction which discusses the overview of the document, this is followed by
presentation and analysis on data flow diagram for purchase and cash disbursement system, the
data flow diagram for payroll, the system flow chart of purchases system, the system flowchart
of cash disbursement system, the system flowchart of payroll and lastly the internal control
weakness in each system as well as the risks associated by the weaknesses.

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Table of Contents
Executive summary...................................................................................................................................2
Table of Contents........................................................................................................................................3
Introduction...............................................................................................................................................4
Data flow diagram for purchase and cash disbursement systems..........................................................4
Purchase system.....................................................................................................................................4
Cash disbursement system....................................................................................................................8
Data flow diagram for payroll system......................................................................................................9
System flowchart of purchases system...................................................................................................11
System flowchart for cash disbursement system...................................................................................13
System flow chart of payroll system.......................................................................................................14
The internal control weakness in each system and risks associated by the identified weakness.......15
Purchase system...................................................................................................................................15
Cash disbursement system..................................................................................................................15
Payroll system......................................................................................................................................15
Conclusion................................................................................................................................................16

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Introduction
Expenditure cycle is a very critical aspect in any business organization. It involves
buying goods and services with cash. The main objective of expenditure cycle is to reduce the
cost of acquiring and maintaining supplies, inventories and services. Expenditure cycle also help
to ensure that all goods and services get ordered and received as required as well as ensuring that
the goods are in good conditions as they were ordered (Trigo, Belfo and Estébanez, 2016,
pp.987-994; Hall, 2012, pp.02). Being such an essential aspect of a business model, I sought to
prepare this report (as a business analyst at Bell Studio, an Adelaide-based wholesaler of art
supplies) to the chief operating officer in order to evaluate the processes, risks as well as the
internal control for the organization’s expenditure cycle.
Data flow diagram for purchase and cash disbursement systems
Upon analysis on the organization’s data flow and purchase system, we came up with a
flow diagram on the systems presented in this section. The section will first show the diagram for
the purchase system followed by cash disbursement system.
Purchase system
This system involves a procedure for purchase processing that involve various
undertakings that are followed when an order is purchased as well as identification and receiving
inventories and evaluating liabilities that are available (Randall, and George, First Data Corp,
2010, pp.24-31). Figure 1 below summarizes the purchase system of Bell Studio organization.

Strategic Information Systems for Business and Enterprise 5
Figure 1: Data flow diagram for purchase system.
The processes illustrated in the diagram can all be applied in the manufacturing and retail
sector of the organization. Be that as it may, the main difference that arise between the two
sectors is the way various purchases are authorized. It can be seen from the diagram that the
manufacturing sector of the organization only buy materials which are important for production
where their decisions to make purchases are passed by production planning and their control
function (Premuroso, Hopwood, and Bhattacharya, 2011, pp.163-179). The organization’s
merchandise sector buys finished goods which they sell while the inventories control are
responsible for approval for purchases in this segment. The organization’s inventories records
Purchasing
Department
Inventory
Warehouse
Cash
Disbursement
Department
Monitor inventory
records
Updates inventory
records
Receives Goods
Prepares Digital
Purchase Order
Updates Inventory
Control Access
Updates AP Control
Access
Updates digital AP
subsidiary ledger
Valid Vendor File
AP Pending File
Vendor
Account
Payable
Department
Inventory
Subsidiary
Ledger
Receiving
File
Digital
purchase
order records
Purchase
order copy
1
Purchase order copy 2
Receiving reports copy
Receiving report copy 2
Sends invoice
Sends invoice
Inventory level

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are done when the organization completes its inventories by transferring its materials at the
production level. This refers to the conversion cycle as well as resell of the finished goods
through the revenue cycle to the consumers (Murray, Skene, and Haynes, 2017, pp.369-380).
The finished products are controlled, recorded and monitored by the inventory. When a drop in
level of the inventory is recorded, the purchase clerks will need to make the purchase order
function which will be intern used in making purchases.
Due to the reason that the purchase requisition is varies and is fundable in various
companies, Bell studio will participate in preparing the purchase requisition for inventory system
when required. As a result, a good number of purchasing requisition will be required and the
requisitions need to be complied into one requisition before they get submitted to the vendor
(Seifert, Sayor, and Baumgart, Western Union Co, 2010, pp.19; Killian et al. 2014, pp.180). By
this, each purchasing order will be linked to many purchase requisitions.
When the purchase order function is prepared, the purchasing requisitions organized by
the vendor can be obtained anytime it is required after which a copy of the purchase order is
designed for the respective vendors as the flow diagram in figure 1 depicts. Another copy of the
document can also be sent given to the purchasing department in order to set up the account
payable functions for its pending files.
Typically, a time lag between placing an order and receiving goods is experienced be
many organizations. at this time, various copies of purchase orders are included in temporary
files in the departments for account payable thus no economic aspect get accomplished (Zee,
2010, pp.123-124, pp.39). This is when Bell Studio has neither accessed any inventory nor
incurred any financial duty. If this is the case, the need to facilitate formal entry into the

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accounting records is not necessary. However, the organization may decide to, in reference to the
related inventory obligations and receipts that is pending, make a memo.
Afterwards, the receipt inventories through which reports for arrival and receiving of
goods will be prepared. The goods will then afterwards get reconciled with digital purchase order
and packing slips. The documents will show data on the quantity as well as costs of the materials
in order to allow the receiving clerk to count and inspect the inventories before a receiving report
is written by the clerk. In most cases, the departments which receives these goods get busy, as
such, the staff may end up signing the landing bills or unloading the delivery vehicles. During
such circumstances, the clerks are only given the relevant data on the quantity of items on basis
of which he will accept the product delivery.
In the stage involving provisions of updates on the inventory records, the inventory
controls differs in various companies. The organizations that uses the standardized cost
framework may have their inventory executed at a predetermined figure which is standardized
disregarding what is charged by a vendor. Providing a ledger for standardized inventories require
the relevant data showing the quantity that has been attained. Due to the fact that the receiving
report has data on the item quantity, the main inventory data will require financial data from the
inventory warehouse when it is updated (Hall, 2012, pp.71-79). The accounts payable will need a
set up during this transaction process. As such, these accounts will have the setting as purchase
order is filed. Bell Studio corporate has been given these documents by their vendors and has
realized their duty to pay for the items received.
To condense the process, it is imperative that the account payable clerks evaluate the
value of duty until invoice is received. On the off chance that the estimate is materially not
favorable, the entries will need to be adjusted in order to rectify the mistake. All the liabilities

AP Department
Updates
Documents
Document Receipts
Identification
of Liability Due
Treasurer
Vendor
Preparation of
cheque for invoice
account Signature
Mailing
Receiving
Receiving Report File
Invoice FileCheque Copy
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that have not been recorded by the end time should be evaluated by clerks due to the reason that
the receipts of the received invoices may trigger the accounts payable processes and techniques.
Cash disbursement system
The flow diagram for the cash disbursement system is presented in figure 2 below.
Figure 2: Data flow diagram for cash disbursement system
Evaluation of the cash disbursement is a critical undertaking in an expenditure cycle.
When relevant documents are received by the clerk from the account payable departments, he
does fillings before payment day. During the payment date, the clerk will be tasked with the
responsibility to make cheques that are referenced to the accounts which invoiced. The cheque

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will then get submitted to the company’s treasure who will sign it and further mail it to vendors.
Consequently, the account payable control and account payable subsidiaries cheque get updated
from the computer terminals. Afterwards, the records will then get submitted to the receiving
departments to file invoices, receive copies of check and reports as well as copies of purchase
order.
Data flow diagram for payroll system
The Bell Studio’s pay roll system is made to for the organization employees to fill time
cards in used for collecting data regarding the total hours that the employees have worked.
Figure 3 below shows a flow diagram for the payroll system.

Prepares cash
disbursement
vouchers
Payroll DepartmentEmployees Time Cards
Supervisors
Central Payroll SystemTime Card data
Payroll register
Payroll register
Supervisor
AC Department
Write ChequesCheque file
Imprest bank
General ledger
department
Cheque file
Department Employees
Reviews and submits
Hour’s records
Digital Employee Record
Reviews and submits
Deposits
Reviews
Check
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Figure 3: data flow diagram for payroll system
The organization supervisors review the information that is conveyed by the time card
after which they forward it to the payroll department. After the information is submitted to the
payroll department, the clerk will then send the employees cheque for review and distribution by
the supervisors after filing the time cards (Tarapata, Intuit Inc, 2009, pp.08). Consequently, the

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clerk will send payroll register copies to the accounts payable and other time card copies to the
payroll department.
Account payable clerks will then review the registers submitted and then manually make
the cash disbursement voucher then submit the register containing the payroll to the department
of general ledgers and the account payable clerk drafts a payroll cheque after which the checks
are submitted to banks.
System flowchart of purchases system
The flowchart include the inventory control through which the inventory level gets
examined. The figure 4 below shows the system flowchart of purchases system.
Figure 4: System flowchart of purchases system
When a predetermined reordering drops, a purchase requisition gets developed by the
clerk where one copy of the document is submitted to purchase department while another copy is

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filed in the requisition file. The process follows the requisition purchase sorting by the vendors
and development of the purchase orders for vendors from relevant departments. The purchase
orders is produced into two copies which are submitted to the vendor while another copy
submitted to inventory control panel where they are filled with the present purchasing requisition
(Kim H.J., Kim D.Y., Sung, and Jin, Samsung Electronics Co Ltd, 2009, pp.51). Items from the
vendor will afterwards get reconciled with blind copies of purchase orders.
On completing the inspection and physical accounting process, the reports will be drafted
by the receiving clerks stating the quantities and conditions of inventories. The copies of the
report are submitted to the purchase and inventory departments after then the clerk will reconcile
it with the purchase orders available. The clerk will get the submitted invoices in the account
payable department from which the information is reconciled with the pending document files
that are available. On receiving these document, a record showing a relevant transaction get
arranged. Before, this is done, a record of liabilities through which a clerk sends his sourced and
send relevant files is done. At this point, the digital account payable subsidiaries ledgers get
updated. After this, the purchase orders copies, invoices and receiving reports are submitted to
the cash disbursement sectors.