ACC539: Analysis of Expenditure Process for Platinum's Special Orders

This report, focused on ACC539, provides a comprehensive overview of the expenditure process for special orders, specifically from purchase to payment, with a primary focus on the Platinum company. It begins by outlining the current process, including material procurement, order placement, and payment procedures. The report then identifies internal control weaknesses, such as miscommunication, inaccurate data, and lack of training, and their impact on the organization. A zero-level diagram illustrates the material movement process. The study emphasizes the potential benefits of implementing a SAP system for improved material tracking and accountability. It recommends strategies for mitigating identified risks, including duty segregation, job rotation, and the use of SAP and ERP tools. The report concludes by highlighting the significance of internal control procedures and suggests that the SAP system is a suitable tool for establishing invoice processing tolerances. References to supporting literature are included. This report is valuable for students studying finance and business process management.

ACC539

TABLE OF CONTENTS
Introduction................................................................................................................................4
PART 1.......................................................................................................................................4
PART 2.......................................................................................................................................5
PART 3.......................................................................................................................................5
PART 4.......................................................................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9

LIST OF FIGURES
Figure 1: Zero level diagram of cited situation..........................................................................5

INTRODUCTION
The present study intends to provide an overview of the expenditure process for special
orders, giving main consideration towards process from purchase to payments. Along with
this, the study offers a reliable tool for monitoring material movements. On and on, the study
also identifies the internal control weaknesses, and the impact of the same on the organization
in regards to the Platinum’s special orders. Based on the analysis, the study will draw viable
recommendations to assist the organization in managing its internal process and the
mitigating the identified risks and weaknesses.
PART 1
By considering the existing scenario, the purchasing team is required to firm the purchase
order to the supplier on the basis of the requirement derived from the planning team. In a
situation where the material is derived in store, outlets and factories associated with the count
of raw materials physically (Goldratt and Cox, 2016). By this, the supplier provides a
packing slip, which is further sent to the purchase and is then assessed with the order of
purchase by the purchasing team. Further, the transferring of payment is done to the specified
supplier on the date at which is due when the packing slip is accepted with the confirmation.
Thus, the material is then sent to the production floor when the request is received.

PART 2
Figure 1: Zero level diagram of cited situation
In the prevailing situation, there can be the implementation of the SAP system for the
material movement from one plant location to another, for the optimum material
accountability. In this case, SAP ERP would be very beneficial in terms of tracking and
monitoring the stock system across the production process (Chang, 2016).
PART 3
On the basis of special orders, at present, the Platinum is constantly monitoring the
movement of material by mailing the hard copy of the documents. The weakness can come in
the form of miscommunication, thereby failing the entire process. If there is the presence of
miscommunication in respect of any of the team member, then there is also a mismatch in the
data‘s information (Monczka, Handfield Giunipero and Patterson 2015). Miscommunication
can give birth to several other issues such as inaccuracy in the purchase order information,
which are related to items or quantities. Also, there can be the threat of non-authorized
Demand of market by the market
team
Forecasting by planning team on the basis of
fcatory facility
Request for purchase sent to
supplier
Recieving the quotation fom the
supplier
Placing of purchase
Raw material recieved and counts
physically
Detail entry in the system
database
Request for production via
system
Approve
Close purchase
request
Inform to supplier
Reject
If issues
are there
Verified

purchases, defrauding or abusing of purchasing systems and un-authorization of adjustment
in supplier accounts. One of the main weaknesses that take place from the purchase order
process is that the appearance of invoice data prior to the date of purchase in the system, this
generally takes place, when the invoice is gained prior to the setting up of purchase date,
making it a more complex process. Lack of training and compliance are the main causes,
causing considerable delay (Knechel, and Salterio, 2016).
Other related weakness in the purchase order generally arises throughout organizations in
regards with the processed purchase order inclusive of; a considerable delay taking place
between the times when there is receiving of receipt and when the same is processed in
opposition to the purchase order within the system. Inadequate compliance in regards to the
requirement of the purchase order and a shortage of review of purchase orders is another root
cause. Thus, such weakness and issues can arise when processes to issue purchase order on
time to time basis are not stabilized, better controls and approvals for allotting purchases
orders are absent also there is no managerial support (Úbeda, Alsua and Carrasco, 2015).
The organization can be impacted by the difficult management of monitoring of the purchase
orders and doing the same in an effective manner is very challenging, and is prone to
mistakes, complexities also these can be easily circumvented (Song and Thorén, 2017). If
there is the absence of proper control, then the organizations suffer from a breakdown in the
purchase order areas.
By considering the identified risks and impacts, the internal process can be effectively
managed by following these steps:
 Categorizing duties to employees
 Allotting specified duties to all employees
 Job rotation
 Use of SAP and ERP
When the duties are segregated by the company to employees, then it helps in reducing the
chances of an employee to harm the assets while preventing the changes of theft. If the
organization allows each employee, particular duties, then they will be able to track the
misplaced documents and can identify whether the transaction was appropriately recorded or
not. On a frequent basis, organizations have a rule that all employees must consider the
policy of annual vacation (Laudon and Laudon, 2015). Further this, policy demotivates the
theft, as most of the invalid schemes fail when there is no attendance of the employees on that

particular scheme. Companies must also make use of various tools and devices which are
SAP and ERP protect the assets, by this company will be able to manage proper and justified
records. One of the best methods to make sure that the accounting record is accurately
managed is the SAP control which will determine and consider risks related with the material
movement by making use of a dynamic approach while evaluating adoption of the means
selected to mitigate the risks.
PART 4
A given in the part (c) that there is the availability of Enterprise resource planning system in
order to conduct monitoring of all involved activities, for the same SAP is very beneficial IT
tool that can be adopted by the Platinum for evaluating the movement and material from one
place to another.
When the raw material is received in the factory, then it is required to be entered in the SAP
immediately. Further, the request can be provided by the specific department meant for the
next material movement. In addition, the SAP has a range accessible module with distinct
characteristics such as the QM module, MM module, PP module and so on. For reducing the
duplicity and other related weaknesses, organizations are required to form solid controls
throughout the request and processes of approval (Holub and Bruckner, 2016).
The recommended SAP system, assist the organizations in achieving the optimized
opportunities in this system is the configuration by vendors. Also, this control system assists
in ensuring that purchase order are fully completed, and at the time of invoice processing,
vital documented which are implemented for verification could be sent to a comparison on a
full basis. By the implementation of SAP, organization take benefit of the double
authorization of the sensitive areas, this will help in securing data fields and other sensitive
information. In addition, this will also help in eliminating the risk of fraud (Bradford, 2015).
The SAP control can assist the organization in achieving higher automation, by matching the
order to the receipt of product; this will enable the organization to ensure they do not agree
with receipts of products which are not ordered by them (Hahn and Packowski, 2015). The
SAP system also facilitates organizations to match the products receipt quantity to invoices,
by this organizations can make sure that it is not paying for the products that are not received
by them.

This control also enables automatic to approve the invoice for the last payment, if the
purchase order, invoice and product receipt are verified, and then the system on an automatic
basis will do the payment issue to the supplier, thereby eliminating any error (Kumar, 2018).
CONCLUSION
Based on the above analysis, the conclusion can be drawn that it is significant for companies
to develop internal control procedures of operations to ensure risk mitugat6ion. By
considering the identified risks in the present scenario, the SAP is the most suitable system,
as it offers the capability to establish tolerance of the invoice processing that is associated
with the specific purchase order.

REFERENCES
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systems. Lulu Com.
Chang, J.F., (2016). Business process management systems: strategy and implementation.
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Goldratt, E.M. & Cox, J., (2016). The goal: a process of ongoing improvement. Routledge.
Hahn, G.J. & Packowski, J., (2015). A perspective on applications of in-memory analytics in
supply chain management. Decision Support Systems, 76, pp.45-52.
Holub, I. & Bruckner, T., (2016). Measuring complexity of SAP systems. Complex Systems
Informatics and Modeling Quarterly, (8), pp.60-67.
Knechel, W.R. $ Salterio, S.E., (2016). Auditing: Assurance and risk. Routledge.
Kumar, A., (2018). Business process management. Routledge.
Laudon, K.C. & Laudon, J.P., (2015).Management information systems (Vol. 8). Prentice
Hall.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. & Patterson, J.L., (2015). Purchasing and
supply chain management. Cengage Learning.
Song, P. &Thorén, M., (2017). The relationship between management control systems and
strategy: Multiple institutional logics in practice. Sage.
Úbeda, R., Alsua, C. & Carrasco, N., (2015). Purchasing models and organizational
performance: a study of key strategic tools. Journal of Business Research, 68(2),
pp.177-188.