Hercules Ladders manufacturer of light-weight, industrial strength, extendible ladders and scaffolding that are used extensively by general contractors and many other industries. The company sells its products through its catalog and industry outlets. The company has its manufacturing facility, warehouse, and distribution center in Youngstown, Ohio where it employs 160 sales, clerical, and manufacturing staff.

Hercules employs batch processing and has a centralized computer system with distributed terminals in the departments. Recently, they have been having quality control and budgeting problems, so their CEO has hired you to review the company's operations and internal control procedures. The following describes their manufacturing process.

The production process is triggered by a three month marketing forecast of expected sales, which goes to the production planning and control clerk From her terminal, the clerk updates the digital Production Schedule to include the batches of ladders and scaffolding to be produced during the next quarter. Drawing upon data in the BOM and routing sheet files, the system automatically prepares weekly the digital work orders move tickets, and material requisitions, which it sends to the work center supervisor's terminal.

The work center supervisor accesses the digital documents and prints hard-copy work orders, move tickets, and materials requisitions. The supervisor distributes the move tickets and two copies of the purchase requisitions to each work center in the production process.

Employees submit the two copies of the material requisitions to storekeeping in exchange for raw materials such as aluminum stock and steel pipes. If additional raw materials are needed beyond the standard quantity, the supervisor issues additional material requisitions. As the production is completed in each work center, the employees send the move ticket to cost accounting to mark the completion of that phase of the batch. Employees also record labor time spent on each batch on hard-copy job cards, which they send to cost accounting. Finally, upon completion of the batch the supervisor closes the open work order file.

The storekeeping clerk files one copy of the material requisition and updates the raw materials inventory file from the terminal in his office. The clerk then sends the second copy of the material requisition to cost accounting. At the end of the day the clerk prepares a digital journal voucher and posts it to the general ledger control accounts.

The cost accounting clerk accesses the digital work orders and sets up a WIP account for the batch. The clerk also receives move tickets, job tickets, and materials requisitions throughout the production process, which she uses to post to WIP subsidiary ledger. At the end of each day, the cost accounting clerk prepares a digital journal voucher and posts to GL control accounts to reflect the status of WIP and to record transfers of WIP to finished good inventory.

Required

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

b. Create a system flowchart of the existing system.

c. What risks exist in the system as it is currently designed?

d. Describe the changes needed to reduce the risks.