B. Description of Accounting Information Systems at Brighton Enterprises (20 points) Brighton Enterprises located in Akron, Ohio is a leading wholesaler of electronic components used in commercial and industrial applications. The companys accounting systems employ a combination of manual procedures supported by a centralized computer system with terminals located throughout its facilities. Recently, Brighton Enterprises has experienced operational problems and has hired your firm to assess its internal control procedures. Below is a description of the sales order processing, cash receipts, purchasing, cash disbursements, general ledger department, and controllers office procedures of Brighton Enterprises. Sales Order Processing Procedures The sales department receives orders from customers for electronic components via fax, email, or phone. A clerk in the sales department creates a sales order that details the items ordered by the customer. Next the sale clerk performs a credit check on the customer. If it a returning customer, the sales clerk checks the customers payment history from the centralized credit records. For new customers, a full credit check is performed via an online credit bureau. Once the sales clerk approves the creditworthiness of the customer, she prints a sales order, a packing slip and a stock release document from her terminal. The clerk adds a record to the digital open sales order file and sends the hard copy of sales order, packing slip, and stock release documents to the billing department, shipping department, and warehouse, respectively. When the warehouse receives the stock release, a warehouse clerk pulls the items ordered from the warehouse shelves and delivers the merchandise to the shipping department, along with the stock release documents. Finally, the warehouse clerk updates the inventory subsidiary ledger from the terminal in the warehouse. When the shipping department clerk receives the merchandise and stock release documents, he compares them to the packing slip previously received from the sales department and appropriately resolves any differences identified. The clerk then prepares a bill of lading, which accompanies the goods to the carrier. Finally, the shipping clerk prepares a shipping notification, forwards it to the billing department, and records the shipment in the digital shipping log. Upon receipt of the shipping notification from the shipping department, the billing department clerk compares the shipping notification to the sales order that was received from the sales department, resolves any differences, and adds prices and freight charges to create a sales invoice, which is sent to the customer. From the department terminal, the clerk then records the sales detail in the sales journal and updates the digital accounts receivable subsidiary ledger. At the end of the day the billing 9 department clerk prints a hard-copy accounts receivable summary and the sales journal voucher to record sales, which she sends to the general ledger department. Cash Receipts Procedures Mail room clerks, under the supervision of the mailroom director, open customer cash receipts, review the checks and remittance advices for completeness, and record the information on a remittance list. Three copies of the remittance list are made--one copy is sent with the checks to the cash receipts department; the second copy and the remittance advices are sent to the billing department; and the third copy is sent to the Controllers office to be used in preparing cash reconciliations. When the cash receipts clerk receives the checks and remittance list, he verifies the checks received against those on the remittance list and endorses the checks For Deposit Only. Once the checks are endorsed, he records the receipts in the cash receipts journal from his terminal. The clerk then fills out a deposit slip and deposits the checks into the bank. At the end of the day, the clerk prints a hard-copy cash receipts journal voucher and sends it to the general ledger department. Upon receipt of the remittance list and remittance advices, the billing department clerk records the amounts in the accounts receivable subsidiary ledger from the department terminal. At days end, the clerk prints a hard-copy accounts receivable summary and sends it to the general ledger department. Purchasing Procedures Inventory levels are continually monitored by the Inventory Control group and when inventory levels fall below pre-determined quantities, they prepare a purchase requisition identifying the appropriate vendor from the pre-authorized valid vendor file and forward the requisition to the purchasing department as authorization for the purchase. Upon receiving the purchase requisition, the purchasing department clerk manually prepares a hard copy of the purchase order and forwards the purchase order to the vendor. The purchasing department clerk forwards copies of the purchase order to receiving and accounts payable. When the goods arrive from the vendor, the receiving clerk matches the packing slip that accompanies the shipment with the purchase order that they received from the purchasing department clerk. If everything is in order, the receiving clerk signs the purchase order and prepares a hardcopy receiving report. The clerk then sends the receiving report along with the signed copy of the purchase order and packing slip to the accounts payable department. A copy of the receiving report is also sent with the goods to the warehouse. The warehouse clerk upon receiving the goods enters the information to update the inventory subsidiary ledger to reflect the receipt of the goods into the warehouse. Subsequently, the accounts payable clerk receives the vendors invoice, which she matches with the purchase order received from purchasing and the receiving report that she received from the receiving department evidencing receipt of the goods. From her department terminal, the accounts payable clerk then enters the purchase into the automated purchases journal and updates the accounts payable subsidiary ledger to reflect the new liability. At the end of the day, the accounts payable clerk prints the journal voucher to record the purchases and forwards the journal voucher to the general ledger department along with a hard-copy of the accounts payable summary. 10 Cash Disbursements Procedures The accounts payable clerk regularly reviews the accounts payable subsidiary ledger from her department terminal to identify liabilities that are coming due. For those coming due, the accounts payable clerk prints out a hard-copy cash disbursement authorization form and forwards the authorization forms to cash disbursements along with the supporting documentation. Upon receiving the cash disbursement authorization forms and supporting documentation from accounts payable, the cash disbursements clerk reviews the supporting documentation, prepares the checks, and enters the checks into the automated cash disbursements journal. The checks are then sent to the Treasurer for signing and are then sent out to the vendors. One copy of the check is filed in the cash disbursements department, and the cash disbursement clerk sends a second check copy, along with the original cash disbursement authorization form, to the accounts payable clerk so that she can update the accounts payable subsidiary ledger. At the end of the day, the cash disbursements clerk prints a journal voucher to record the cash disbursements and forwards the journal voucher to the general ledger department. General Ledger Department Procedures Upon receipt of the sales journal voucher, the cash receipts journal voucher, and the accounts receivable summary, the general ledger department compares the journal vouchers to the accounts receivable summary information, follows up on any discrepancies noted, and records the journal vouchers in the general ledger and adds the journal voucher details to the journal voucher file using the department terminal. Similarly, upon receipt of the purchases journal voucher, the cash disbursements journal voucher, and the accounts payable summary, the general ledger department compares the journal vouchers to the accounts payable summary information, follows up on any discrepancies noted, and records the journal vouchers in the general ledger and adds the journal voucher details to the journal voucher file. Controllers Office Procedures On a monthly basis a clerk from the Controllers office who is independent of the above processes performs a reconciliation of the accounts receivable subsidiary ledger to the accounts receivable general ledger control account, the accounts payable subsidiary ledger to the accounts payable general ledger control account, and all company cash accounts, and follows up on any reconciling items. Required: Based on processes described above that are in place at Brighton Enterprises, identify (1) the internal control procedures that are in place; and (2) any weaknesses in the internal control procedures along with the reason why it is a weakness.