CASE STUDIES

CASE A: Pure Products Company (Accounts payable and cash disbursements processes)

The Pure Products Company sells medical supplies to hospitals, clinics, and doctors' offices. Pure Products uses an ERP system for all of its business processes. Pure Products employs the following procedures for accounts payable and cash disbursements.

The accounts payable (AP) department receives invoices from vendors. An AP clerk enters the PO number from the invoice into the computer, and the computer displays the PO. The clerk then keys the invoice data. The computer matches the invoice data with data on the PO (purchase and receipt data). If there are price or quantity variances of more than 5 percent, the invoice is routed, via workflow, to a purchasing agent for approval. Once validated (by the computer and, if necessary,

purchasing), the computer records the invoice (i.e., accounts payable) and updates the PO and general ledger master data.

Every morning, the accounts payable department reviews open invoices (i.e., accounts payable) to determine if they should be paid. An AP clerk selects those invoices that are to be paid, and the computer prints a check in the accounts payable department and updates the accounts payable and general ledger master data. Accounts payable mails the check to the vendor.

CASE B: Car Maker, Inc.

Car Maker is a major manufacturer of automobiles. This narrative describes the purchasing, accounts payable and cash disbursement process for original equipment windshields for its only supplier of windshields, Glass.

Car Maker's inventory system requests the purchasing department to reorder windshields. When the PO is created a record is added to the PO file (all data is stored on magnetic disks) and an electronic transmission is sent to Glass. Glass acknowledges the order (also electronically).

Glass ships the order and sends an electronic invoice to Car Maker. The electronic invoice data is recorded to a pending invoices file.

When the goods arrive at Car Maker's warehouse, a receiving clerk examines the goods and keys in the receiving data. The keying operation creates a receiving record on the receiving file and updates the PO record to reflect the receipt.

Each morning, the AP clerk accesses the pending invoices file to identify invoices for which there are receiving reports and POs. The computer matches the invoice data to the PO and receiving data and displays them to the clerk. If the data does not match the clerk follows up with Glass to resolve discrepancies. If the data matches, the clerk enters the date the invoice should be paid and an authorization code for the bank to transfer payment to Glass on that date. The payment authorization is encrypted and transmitted electronically to Car Maker's bank where it is stored until the payment date.

For the company assigned by your instructor, complete the following requirements:

For the company assigned by your instructor, complete the following requirements:

a. Draw a systems flowchart.

b. Prepare control matrix, including explanations of how each recommended existing control plan helps to accomplishor would accomplish in the case of missing planseach related control goal.

Annotate the flowchart prepared in part (a) to indicate the points where the control plans are being applied (codes P-1, ..., P- n ) or the points where they could be applied but are not (codes M-1, ..., M- n ).