Reference no: EM13500767

Learning objective: Demonstrate an understanding of essential accounting information systems, standards, and controls.

Assume you are a CPA with a small local practice. You have three professional employees, all relatively new CPAs, and an office manager. Your practice consists primarily of tax and write-up work. You have a new client-a homeowners' association consisting of 150 homeowners-and you have contracted to perform the following services:

billing: Each quarter, you will send each homeowner an itemized bill. Dues are $50 per month ($150 per quarter). Late fees are one percent per month of the unpaid balance. The bills will be mailed the first day of the last month of the quarter. Payment is due by the end of the quarter.

collection: You rent a post office box and will receive the checks there. You are responsible for depositing the checks (you have opened a checking account for the association).

payment: You will write about five checks a month. Besides your own monthly fee, there are monthly checks to a lawn maintenance company and a refuse removal company. There are also checks written for taxes, postage, supplies, and the like.

reporting: You will be responsible for reporting on all collections, all checks written, outstanding homeowners' balances, and quarterly financial statements.

tax payment: You will be responsible for preparing the association's federal and state tax returns.

advising: You will be responsible for advising the board on an as-needed basis, especially in the areas of budgeting, purchasing, and investment.

You are hoping to expand this new area of your practice. You want to computerize the main functions of this system, concentrating especially on the billing and reporting aspects. Assume that the tax preparation, financial statements, and checking account will not be computerized initially; only the billing and collections portions will be computerized for now.

Required: Using the methodology developed in this course, document and illustrate the system (describe inputs, outputs, controls, and so on); don't overlook manual functions. Consider what reports will be necessary; what kinds of documents/forms will be needed (such as invoices and receipts); and what the reports, documents, and forms will look like. Design at least three documents (reports and/or forms), and provide them as appendices.

Include a discussion about problem areas that could arise, assuming that you will eventually have many more clients and several more employees.