Reference no: EM132304381 , Length: word count:2000

Accounting Assignment -

Part A - Oriental Traders purchases products from Asia and then resells them to local retailers in Sydney and Melbourne. Demand for the imported products has increased significantly over the last 3 years resulting in Oriental Traders expanding their domestic operations, including a new information system, to assist with managing the increase in purchases. You are a systems analyst who has been engaged by Oriental Traders to prepare the systems documentation to assist with the identification of the current business processes. This will assist them in the identification of a suitable system for the acquisition and payment for products.

Interview:

ORIENTAL TRADERS INTERVIEW WITH THE PURCHASING MANAGER

A purchase requisition is raised within the various departments and sent from the inventory management system to the purchasing department clerk. The clerk prepares the purchase order (PO) using the supplier and inventory files. Once the PO is approved by the purchasing manager, it is automatically emailed to the supplier. The supplier returns a supplier confirmation to the clerk indicating receipt of the PO. The purchasing clerk then sends a PO notice to the Accounts Payable (AP) clerk.

When the receiving department accepts the goods from the supplier, the inventory management system automatically send the AP clerk a receiving report. The AP clerk also receives the tax invoices directly from the suppliers. The supplier tax invoices are matched to the PO notice and the receiving report by the AP clerk. If all documents match, payment is authorised and the AP clerk updates the accounts payable master file. Payment request is then sent by the AP clerk to the accounting department. All files at Oriental Trading are filed in date order.

The accounting department then prepares the EFT file for vendor payment. Once the payment has been approved, the system automatically updates the AP master file and the general ledger, and forwards the payment details to the bank.

Required: Based on the interview with the purchasing manager prepare a document flowchart to document the acquisition to payment system that currently exists at Oriental Traders.

Part B - You have been recently employed as an accountant for the Chipps. The CEO, Mrs Sophia Martin, has tasked you with reviewing their expenditure cycle. To facilitate this, she has provided you with key information relating to Chipps inventory purchasing and management (available in Interact).

Using the information provided to you, prepare a business report to the CEO including identification of:

1. internal control weaknesses relating to Chipps expenditure process;

2. the impact these weaknesses could have on the organisation; and

3. specific internal controls which could be implemented by Chipps in the coming months to mitigate the weakness posed by the internal control weaknesses you have identified. Mrs Martin does not want theoretical controls suggested. She wants practical controls that Chipps can implement in the short term. (5 marks)

Part B, questions 1, 2 and 3 must be answered in a table in your report. Answer this question using the following headings:

Internal Control Weakness Impact of the weakness Control to mitigate the weakness

CHIPPS INVENTORY PURCHASING AND MANAGEMENT INFORMATION FROM THE CEO: MRS SOPHIA MARTIN

Chipps is a medium size, privately owned, Australian enterprise. They manufacture computer parts including microchips, motherboards and graphics cards and are a key supplier to computer manufacturers and repairers across Australia. Chipps is 12 years old and uses an integrated ERP system. The administrative offices are in a central city building with the production, shipping, and receiving departments located on the outskirts of town, just 10 minutes away. Below is detail regarding the inventory purchasing and management processes at Chipps.

PURCHASING

A purchase requisition form is prepared by the department head and sent to the purchasing department. Upon receiving a purchase requisition, one of the five purchasing clerks (PC) verifies that the requester is indeed a department head. The PC selects the appropriate supplier by reviewing prior orders placed for the same or similar items. The PC then phones the supplier and requests a price quote. Once the quote is agreed, a pre-numbered purchase order (PO) is processed by the PC, with the original sent to the supplier and copies to the department head, receiving department and accounts payable. One copy is also filed in the open purchase order file. When the receiving department verbally informs the PC that the goods have been received, the purchase order is transferred from the open to the filled PO file. Once a month, the PC reviews the open purchase order file to follow up on any open orders.

RECEIVING DEPARTMENT

The receiving department gets a copy of each purchase order. When equipment is received, that copy of the purchase order is stamped with the date and, if applicable, any differences between the quantity ordered and the quantity received are noted in red ink. The receiving clerk then forwards the stamped purchase order and equipment to the requisitioning department head and verbally notifies the purchasing department that the goods were received.

ACCOUNTS PAYABLE

Upon receipt of a PO, the accounts payable clerk files it in the open purchase order file on their desk. When a vendor invoice is received, it is matched with the applicable purchase order, and a payable is created by debiting the requisitioning department's equipment account. Unpaid invoices are filed by due date. On the due date, a cheque is prepared and forwarded to the treasurer for signature. The invoice and purchase order are then filed by purchase order number in the paid invoice file.

CASHIER / TREASURER

Cheques received daily from the accounts payable department are sorted into two groups: those over and those under $5,000. Cheques for less than $5,000 are machine signed. The cashier maintains the cheque signature machine's key and signature plate and monitors its use. Both the cashier and the treasurer sign all cheques over $5,000.