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The Expenditure Cycle Activity

The document describes two accounting systems with internal control weaknesses. For the expenditure cycle, the receiving clerk can manipulate reconciliations by unloading goods without independent verification. For fixed assets and payroll, there is no separation of duties between accounts payable and cash disbursement in check creation, and access controls are lacking by allowing the accounts payable department to create checks. Suggestions are made to address each weakness.

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Rejoice Gundayao
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260 views11 pages

The Expenditure Cycle Activity

The document describes two accounting systems with internal control weaknesses. For the expenditure cycle, the receiving clerk can manipulate reconciliations by unloading goods without independent verification. For fixed assets and payroll, there is no separation of duties between accounts payable and cash disbursement in check creation, and access controls are lacking by allowing the accounts payable department to create checks. Suggestions are made to address each weakness.

Uploaded by

Rejoice Gundayao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Gundayao, Rejoice R.

BSA 2D
22764 - ACCOUNTING INFORMATION SYSTEMS

Problem 1. - Expenditure Cycle

Required:
a. Create a data flow diagram of the current system.
b. Create a system flowchart of the existing system.
c. Analyze the internal control weaknesses in the system. Model your
response according to the six categories of physical control activities
specified in SAS 78/COSO control model.

CONTROL WEAKNESS SUGGESTION


ACTIVITIES
Transaction NONE NONE
Authorities
Segregation of The receiving The possible
Duties department clerk suggestion is that
unloads all the the idependent
goods and reconcile verifications should
the packing slips be placed in order to
within the purchase reconcile the packing
order as well. If there slips within the
are missing items purchase order.
during the goods
unloading process
the clerk could
manipulate the
reconciliation report
to avoid problems.
Supervision All the clerks are The possible
working suggestion is that
unsupervised. the supervisors
should be put in duty
to make sure each
Clerk to do their
duties correctly.
Accounting Records NONE NONE
Access Control NONE NONE
Interdependent NONE NONE
Verification
Cash Disbursements System

a. Create a data flow diagram of the current system.


b. Create a system flowchart of the existing system
PROBLEM 2: - Fixed Asset and Payroll Procedures

Required:
a. Create a data flow diagram of the current system.
b. Create a system flowchart of the existing system.

c. Analyze the internal control weaknesses in the system. Model your


response according to the six categories of physical control activities
specified in SAS 78/COSO control model.

CONTROL WEAKNESS SUGGESTION


ACTIVITIES
Transaction Authorization of the Authorization has
Authorities transaction has been been done by the
carried out bu the manager of each
supervisor of each individual
Department. department.
Segregation of There is no Cash There is no
Duties Disbursement separation between
Department so a Payable
check is created by Department account
Account Payable and a Cash
Department. Disbursement
Department. Checks
should be created by
Cash Disbursement
Department not by
Account Payable
Department.
Supervision NONE NONE
Accounting Records No time cards, job Purchase Orders are
tickets, employee not set to a Payable
records. Department.
Access Control Access to check Who accesses the
creation should be creation of checks is
done by Cash not A/P Department,
Disbursement it should be Cash
instead of Account Disbursement. The
Payable Department. possibility of fraud
The company’s can occur.
computer laptop
should not be taken
home, possible fraud
can occur.
Interdependent No review of Reconciliation is not
Verification timecards, reconcile done at General
payroll register, Ledger Department.
reconcile accounting
through general
ledger.

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