Green Mountain Coffee Roasters, Inc.

(Prepared by Lisa McCutchean, Lehigh University)

Green Mountain Coffee Roasters, Inc., was founded in 1981 and began as a small cafe in Waitsfield, Vermont, roasting and serving premium coffee. Green Mountain blends and distributes coffee to a variety of customers, including cafes, delis, and restaurants, and currently has about 6,700 customer accounts reaching states across the nation. As the company has grown, several beverages have been added to the product line, including signature blends, light and heavy roasts, decaffeinated coffee and teas, and herbal teas. Green Mountain Coffee Roasters, Inc., has been publicly traded since 1993 and had sales in excess of

$84 million for the fiscal year ending September 2007.

Green Mountain Coffee has a warehouse and manufacturing plant in Wilton, Vermont, where it employs 250 full- and part-time workers. The company receives its beans in bulk from a select group of distributors located across the world, with their largest supplier being Columbia Beans Co. Green Mountain Coffee also sells accessories that complement their products, including mugs, thermoses, and coffee containers that they purchase from their supplier Coffee Lovers Inc. In addition to selling coffee and accessories, Green Mountain uses paper products such as coffee bags, coffee cups, and stirrers to distribute to their customers and package the coffee they purchase from Save the Trees Inc.

Sales Order System The sales process begins when a customer sends a customer order to the sales clerk. The sales clerk first does a credit check using the customer sales history records to authorize the transaction. The sales clerk then prepares a customer copy, a stock release, two file copies, a packing slip, an invoice, and a ledger copy of the sales order. The invoice, ledger copy, and a file copy are sent to the billing department. The second file copy and the stock release are sent to Sara in the warehouse.

The billing department enters all the information from the source documents into the computer, adds prices, and bills the customer.

The computer updates the sales journal, and a journal voucher is prepared (at end of day) and sent to Vic, the general ledger clerk. The file copy is then filed, and the stock release is sent to Sara in the warehouse. A copy of the invoice is mailed to the customer, and the ledger copy is sent to the AR clerk in the accounting department.

Sara then uses the stock release to pick the goods from the shelf. A PC-based inventory system is used to update the inventory subsidiary ledger from the stock release copy. The file copy is filed and the stock release is sent to the shipping department. At the end of the day, Sara prepares a journal voucher, which is sent to the general ledger clerk. The shipping clerk, who reconciles the stock release along with the packing slip and file copy, then prepares a bill of lading. The shipping log is updated, and the stock release and file copy are filed. The bill of lading and packing slip are given to the carrier along with the goods.

In the accounting department, relevant information taken from the ledger (sent from billing) is entered into the computer to update the AR records. A summary (end of day) is sent to Vic. The ledger copy is then filed in the accounting department. Vic reconciles the AR summary with the journal vouchers and updates the general ledger. All documents are then filed.
Cash Receipts System The mail room clerk receives the checks and remittance advices from the customer. He reconciles the checks with the remittance advices and prepares two copies of a remittance list.
The checks and a remittance list are then sent to John, the cash receipts clerk in the accounting department. John uses a PC to process the cash receipts, update the cash receipts journal, and prepare a journal voucher and three deposit slips. The journal voucher is sent to Vic, the general ledger clerk. The checks and two deposit slips are sent to the bank to be deposited into Green Mountain Coffee’s account. The third deposit slip and the remittance list are filed. The second remittance list and the remittance advices are sent to Mary, another cash receipts clerk who, using a separate PC, updates the AR subsidiary ledger and prepares an account summary, which is sent to Vic. The remittance list and the remittance advice are then filed. Vic uses the journal voucher and the account summary to update the general ledger. These two documents are then filed.
Required:

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

b. Create a document 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.

d. Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses you identified.