Strategic Analysis of HARDA Fashion's Accounting Information System

This report analyzes the accounting information system of HARDA Fashion, a retail clothing store. It begins with an executive summary and table of contents, then introduces the purpose of accounting information systems in collecting, storing, and processing financial data for effective decision-making. The report identifies six strengths in HARDA Fashion's system for controlling sales transactions, including manual sales invoice filling, review by cashiers, sequential invoice order, reconciliation by assistant managers, review by managers, and central data processing. It explains how these strengths mitigate problems and potential fraud. The report also identifies situational pressures that could increase the likelihood of fraud within the company and discusses the reasons behind companies choosing distributed over centralized computer systems. The report concludes by summarizing the findings and referencing relevant sources. The assignment was submitted by a student and is available on Desklib.

STRATEGIC INFORMATION
SYSTEMS FOR THE BUSINESS
ENTERPRISE

EXECUTIVE SUMMARY
Accounting information systems provides with tools and the systems designed for
collection and the display of the accounting information for enabling the executives and
managers for making effective decisions. This is considered pivotal component of the finance
office around the world. Report reveals that HARDA is having a strong accounting information
system for controlling sales transaction. The strengths have enabled the company in mitigating
many issues associated with sales transactions. Company has to analyse the situational processes
increasing likelihood of the fraud. Many of the companies use distributed accounting system so
that all the information about company is not stored over single system. In event of frauds entire
information is not hacked in distributed systems.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
TABLE OF CONTENTS................................................................................................................3
INTRODUTION..............................................................................................................................1
REPORT..........................................................................................................................................1
1. Identifying six strengths of controlling sales transaction in system of HARDA Fashion......1
2. Explaining problem that the Fashion has avoided by incorporation of strengths in systems to
control sales transactions.............................................................................................................3
3. Identifying situational pressures of the company such as HARDA which would be
increasing likelihood of the fraud................................................................................................5
2. Employee is dissatisfied with the hourly wages and sales are low not allowing them to earn
commissions................................................................................................................................5
4. Reasons behind companies choosing to install distributed computer systems instead of
centralised one.............................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUTION
Information refers to formal process for collection of data, processing of data into
information and also distributing information to the users. Purpose of the accounting information
is of collecting, storing, and processing accounting and financial data and producing information
reports which managers or the other interested parties could use for making strong business
decisions. AIS could also be manual system but most of the most of the accounting systems are
based on computer. The system is highly efficient in collecting and storing data concerning
financial activities of the organisation. Present report is based over HARDA Fashion that sells
ready to wear fashion clothes for the teenagers. Company had 20 stores chain concentrated in
north east part of USA. Present report evaluates the processes, risks and the internal control
system for the revenue cycle. It will analyse the strengths of the processes to control the sales
transactions.
REPORT
1. Identifying six strengths of controlling sales transaction in system of HARDA Fashion
HARDA is fashion store providing fashion clothes for teenagers. The company has full
time staff consisting of managers and assisting managers. Full time staff of the company is paid
fixed salary. Full time staff of the company is also assisted with the cashiers and the sales
assistant who are having less experience. Company pays its cashier and the sales assistant on
hourly wages plus commission over sales volume. The strengths of the systems that helps in
controlling sales transactions are :
1. Manual filling of sales invoice
The record keeping of sales transactions starts with the assistant over sales floor that
manually fills the sales invoices for ensuring that each and every information is correctly
recorded in the sales invoices. The sales invoices contain all the information relevant for
recording the transactions. It records employee number, details of all the deals regarding the item
number, quantity, descriptions and unit price (Kitsios and Kamariotou, 2016). Total of the
invoices by correctly reviewing it are made. Discounts are also calculated manually as discounts
are given at different terms and basis. Sales tax is also calculated after which grand total is made.
2. Review by cashier
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After manually recording the transactions by sales assistant, invoices are transferred to
cashier. A copy of invoice is kept with sales assistant for cross reference and for having back up.
After reviewing that all the information is correctly recorded invoices are entered in cash
register. Cash register mechanically evaluates validates invoice and automatically assigns the
consecutive to transactions. Cashier takes approval for credit on charge sales and sales paid on
cheque. Three copies of the invoice is maintained for customer, store and for bankcard. Same
process is also followed for the returns.
3. Sequential order of sales invoices
At end of the day sequential order of the sales invoice is made to ensure that all the
invoices are recorded properly and then take totals of cash register bankcard, cash, cash and the
credit card return. Every day review ensures that the transactions are properly recorded and
errors are identified on daily basis. Due to this any missing invoice could be identified so that
cashier could ask for the missing invoices from sales assistant (Kamariotou and Kitsios, 2016).
It makes accurate and error free recording of the sales invoices and reduces the chances of fraud
to considerable extent.
4. Reconciliation report by assistant managers
Totals of the cash register are reconciled by assistant managers to cash tapes, totals of
consecutively numbered invoices and return slips. Assistant manager reviews all the transactions
recorded in the cash register ensuring that each and every transaction is properly recorded by the
assistant managers in sales invoice and in cash register by the cashier. If enables the managers to
identify the variations in invoices and records at initial stage and on daily basis. Errors and
mistakes are identified by managers and rectified on daily basis and also managers ensures that
credit is given after proper approval.
5. Review by managers and deposit in bank
After review by cashier and assistant managers of all the transactions and preparation of
daily reconciliation report, it is forwarded for review by store manager. Manager is responsible
for reviewing all the transactions related to cash, credit card sales and cheques. After the review
if all the transactions are properly recorded and reconciliation statement clarifies every variation
manager prepared daily bank deposit. Deposit is made by the managers at bank on daily basis.
The manager files every validated slip of the deposit.
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6. Central data processing
After the three stage review of all the sales invoice transactions. The manager after
proper review and deposit in bank forwards the cash register tapes, sale invoices and the return
slips to department of central data processing at the corporate headquarters of the company for
recording. Data processing department returns the report of weekly sales and commission
activity to manager for review.
These were the strengths in the system of HARDA in controlling the sales transactions.
There are proper checks and review at each stage. Work of every staff is reviewed by just senior
authority which makes the work of every staff to be cross checked. This makes the system error
free. The systems also reduce the scope for mistakes or conducting fraud within the organisation
as reconciliation process identifies the variation in records and the invoices (Budiyanto and
Setyohadi, 2017). Daily check enables to identify the error at initial stage before it affects the
business significantly.
2. Explaining problem that the Fashion has avoided by incorporation of strengths in systems to
control sales transactions
Sales invoice transactions are one of the most important transactions carried out by the
company. IT requires company to have strong controls and review processes for initialising the
sales transactions. Sales invoices should be reviewed and authorised by the senior authorities
where special discounts or rates are to be quoted. Often frauds and errors are committed in the
sales transactions in the company due to which strong controls for the review and recording of
sales transactions are established. It requires the management to ensure that the sales transactions
are recorded following the set procedures and also cash and credit transactions are recorded
separately reviewing the discount rates. Strengths of the sales transactions system of HARDA
has enabled the company to reduce number of issues and problems that could have been occurred
without this strong system. For each strength identified there were problems which have been
avoided due to this.
1. Manual filling of sales invoice
The sales invoice transactions of the company are recorded manually by the sales
assistant. Manual recording avoids the errors and mistakes in preparing the sales invoice. When
the invoices are prepared using machines there are many of the errors seen if any of the field is
left unfilled. The assistant reviews all the information so that any wrong information about the
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sales is not recorded. The discounts are given at varying rates and manual systems allows to
record discount at different rates where the machine have one or two fixed rates. Sales tax are
properly analysed and calculated after which grand total. In machine system if any of the
information in sales invoice is not matched the invoices are kept pending (Kamariotou, and
Kitsios, 2017). It makes one time review by sales assistant that invoice is prepared correctly
following all requirements.
2. Review by cashier
After the sales are invoiced by sales assistant they are forwarded to cashier. One copy of
sales invoice is kept with assistant. Record of copy by assistant prevents the cashier to make any
changes in the original invoices from the one initiated by assistant. Without this control cashier
may have made changes the invoices for conducting frauds. Invoices are validated mechanically
by cash register that prevents issue of invoices with same number. Cashier also reviews the
invoices ensuring that all the transactions are properly recorded. This avoids the errors to be
conducted on the part of assistant as all the work is reviewed. Approval of credit has avoided the
cashier to give credits to customers of his interest and ensuring that proper control is there in
credit and sales transactions. Three copies are generated for cross reference and for record
keeping that protects company from future contingencies related to sales. The return also follows
same process that prevents frauds in returns as significant frauds are conducted in returns.
3. Sequential order of sales invoices
At the end everyday all the invoices are ordered sequentially for ensuring that all the
invoices are recorded and no invoice is left unrecorded by the cashier. The sequential order of
invoices prevents missing of any invoice from between and confirms that all the invoices are at
place. After analysis of the invoices of whole day totals of the bankcard, cheques and credit card
return and forwarded to assistant manager (Hung and et.al., 2020). This strength prevents the
omission of any invoice to ve recorded in the record. The business strategies make the business
4. Reconciliation report by assistant managers
After the totals of cash register, it is forwarded to assistant managers of company. the
assistant managers reconciles all the totals of cash, cheque sales, bank card and credit and cash
return with cash register tapes, total of consecutively numbered invoices and return slips.
Reconciliation of the totals enables the manager to identify any errors or deviation from the
invoices and return slips. The problem of fraud or misstatement by assistant and cashier is
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avoided due to review by the assistant manager. Daily reconciliation report establishes accuracy
of the transactions carried out. The report is forwarded to manager for review.
5. Review by managers and deposit in bank
The work of all the staff associated with invoicing, recording and reconciling is reviewed
finally by manager so that mistake or error if not identified at any of the stage is inspected and
identified by the managers. Bank deposit is made by manager which reduces the problems
associated with cash management and a proper deposit slip is obtained for the deposit.
6. Central data processing
After the deposit is made all the information related to cash register, sales invoices and the
return slips is forwarded to central data processing department. Central department makes the
information recorded over central server. At the time of system failures information is properly
recorded over central processing department (Raja Mohd Ali and et.al., 2018). Weekly sales and
commission activity report is sent back to managers for review that ensures no information is left
unrecorded.
3. Identifying situational pressures of the company such as HARDA which would be increasing
likelihood of the fraud.
Frauds refer to intentional act conducted for dissembling assets of the company. It could
also be measured as altering or misusing financial records for the personal benefits. If frauds are
not controlled at early stage it could significantly affect the business. It is essential for the
company to identify the things which motivate people or employees to commit frauds so that
they could more better assess the risks associated with business (Altaee, 2020). Frauds are
generally committed by the employees when they face situational pressures for committing
frauds in the organisation they are serving.
Situational pressures which could increase the likelihood of conducting the frauds.
1. When employee has sudden sickness and requires large amount of cash.
2. Employee is dissatisfied with the hourly wages and sales are low not allowing them to earn
commissions.
The above two situational pressure could lead the employees of the company to commit
fraud. It has been identified by many studies that frauds have little to do with the opportunities,
but highly with the motivation. Dissatisfaction of employees from the wages or salary motivates
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employees to commit frauds. For balancing the scales or needs and requirements employees tend
to commit frauds
Second reason behind employees committing frauds is financial pressures faced by them.
Various studies and interviews of convicted executives provides that majority of the frauds are
committed for meeting the financial obligations (Bradley, 2017). When employees fall in sudden
cash requirements, probability of committing frauds increases to a considerable extent.
Therefore the Firm like HARDA is required to ensure that employees are provided with
sufficient remuneration and wages for their work. Also, there should be direct communication
channels where the problems of the employees are heard and resolved to the extent possible.
These situational pressures could affect company for which effective controls should be
established for preventing frauds at any cost.
4. Reasons behind companies choosing to install distributed computer systems instead of
centralised one.
Distributed computing refers to group of computers which are working together at
backend, appearing as one to end users. Individual computers that are working together in the
groups are operating concurrently allowing whole system working even if some or one of them
fails. In distributed systems many computers could host differential software components, but
computers connected work for accomplishing common goals. Computers in distributed group or
system could be located physically at same place or closely together that are connected via local
networks or are connected by WAN. Distributed systems consist of various configurations or the
combination of configurations like workstations, mainframes and personal computers.
Companies are increasing choosing distributed systems over centralised systems as they
are scalable as the system works across different computers and scales horizontally. It means
users could add another computer for handling the increased workload rather than updating
single system again and again. Distributed systems are more fault tolerant as compared with
single machines Firm running cluster of ten machines over three data centres means application
would be working even if one of the data centre goes offline (Kummer and Schmiedel, 2016). As
users could have nodes in various geographical locations, distributed system allows traffic to hit
the nodes which is closest. It results in lower latency and also in better performance. Major
reason behind companies going for distributed system is cost effectiveness as compared with
large centralised systems.
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CONCLUSION
Conclusions could be drawn from the above report that accounting information systems
plays an important role in maintain proper records of the accounting transactions which are
carried out by the organisation. It is difficult for the entity to have accurate records free from
frauds and errors if does not have proper system for recording systems with well established
internal controls at various stages.
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REFERENCES
Books and Journals
Kitsios, F. and Kamariotou, M., 2016, September. Decision support systems and business
strategy: a conceptual framework for strategic information systems planning. In 2016 6th
International Conference on IT Convergence and Security (ICITCS) (pp. 1-5). IEEE.
Kamariotou, M. and Kitsios, F., 2016, June. Strategic information systems planning: SMEs
performance outcomes. In Proceedings of the 5th International Symposium and 27th
National Conference on Operation Research (pp. 153-157).
Budiyanto, D. and Setyohadi, D.B., 2017, August. Strategic information system plan for the
implementation of information technology at Polytechnic “API” Yogyakarta. In 2017 5th
International Conference on Cyber and IT Service Management (CITSM) (pp. 1-6). IEEE.
Kamariotou, M. and Kitsios, F., 2017, June. An empirical evaluation of strategic information
systems planning phases in SMEs: determinants of effectiveness. In Proceedings of the
6th International Symposium and 28th National Conference on Operational Research (pp.
67-72).
Hung, S.Y., and et.al., 2020. Effect of information service competence and contextual factors on
the effectiveness of strategic information systems planning in Hospitals. In Hospital
Management and Emergency Medicine: Breakthroughs in Research and Practice (pp.
146-171). IGI Global.
Raja Mohd Ali, and et.al., 2018. Importance of strategic information systems planning (SISP)
practices in industry 4.0 era.
Bradley, W.C., 2017. Developing a Strategic Information Plan. In Handbook of Data Center
Management (pp. 23-38). Auerbach Publications.
Kummer, T.F. and Schmiedel, T., 2016. Reviewing the role of culture in strategic information
systems research: A call for prescriptive theorizing on culture
management. Communications of the Association for Information Systems. 38(1). p.5.
Altaee, M.A.H., 2020. The Role of Strategic Information Systems in Building Strategic
Alliances: Application to Al-Hikma Pharmaceuticals Company. Academy of Strategic
Management Journal. 19(2). pp.1-11.
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