CH10 5ICC

Required:

c Analyze the physical internal control weaknesses in the system.

Purchasing The process begins in the purchasing department. Each morning, the purchasing agent reviews the inventory levels from his department terminal and searches for items that have fallen to their reorder points and need to be replenished. The purchasing agent then selects the vendors and creates digital POs in the PO file. He then prints two hard copies of each PO and sends them to the respective vendors. Receiving When the items are received, the receiving department clerk reconciles the goods with the attached packing slip and the digital PO, which he accesses from his computer terminal. The clerk then creates a digital receiving report, stating the condition of the materials received. The system automatically closes the PO previously created by the purchasing agent. In addition, the receiving clerk prints a hard copy of the receiving report, which he sends with the inventory to the warehouse where the items are stored. Warehouse Upon receipt of the inventory, the warehouse clerk reconciles the items with the receiving report and updates the inventory subsidiary ledger. The accounting system automatically and immediately updates the inventory control account in the general ledger. Accounts Payable Once the AP clerk receives the vendor's invoice, she reconciles it with the PO and receiving report from her terminal. The clerk then creates a digital cash disbursement voucher record and sets a due date for payment. The system automatically updates the AP control account in the general ledger. Daily, the AP clerk reviews the open cash disbursement voucher records from her terminal looking for items that need to be paid. The clerk then creates a record for the payment in the digital check register and closes the open cash disbursement voucher. Finally, the clerk prints a hard copy of the check and sends it to the vendor. The system automatically updates the AP and cash general ledger accounts. Payroll System On Thursday, every two weeks, employees submit their hours-worked data from their personally maintained time cards to their department supervisors who review and send the time card to the payroll department. The supervisors also provide payroll with personnel action forms that record any employee changes in employee status such as new hires, terminated employees, or changes in pay rate. Upon receipt of the time cards and personnel action forms, the payroll clerk updates the digital employee records from the department PC and prints the payroll register. A copy of the payroll register, along with the time cards, and the personnel action form are filed in the payroll department. A second copy of the payroll register is sent to general ledger clerk, who posts to the general cash account and wages expense for the full amount of the payroll. Next, the payroll clerk prepares the paychecks and sends them to the employee's respective supervisors, who distribute the checks to the employees