Question 5- (Total 15 marks) Walker Books, Inc., is one of the fastest-growing book distributors in the United States. E stablished in 1981 in Palo Alto, California, Walker Books was originally a side project off ounder and current president Curtis Walker, who at the time was employed by a local law firm. Because reading was much more than just a hobby of his, he decided to use some of his savings to buy an abandoned restaurant and convert it into a neighborhood books tore, mainly selling used books that were donated and obtained from flea markets. When the doors first opened, Walker's wife, Lauren, was the only employee during the week and Curtis worked weekends. At the end of the first fiscal year, Walker Books had grossed $20,000 in sales. As the year spassed, Curtis Walker quit the law firm and began concentrating fully on his bookstore. More employees were hired, more books were traded in, and more sales were attained ea ch year that passed. During the mid-1990s, however, Walker was faced with two problem s: many large, upscale bookstores were being built in the area, and the use of the Internet for finding and ordering books was becoming cheaper and more popular for current cust omers. In 1995, Walker's sales started to decline. Deciding to take a risk because of then ewfound competition, he closed his doors to the neighborhood, invested more money to expand the current property, and transformed his company from simply selling used boo ks to being a distributor of new books. His business model was to obtain books from pu blishers at a discount, store them in his warehouse, and resell them to large bookstore ch ains. Walker Books, Inc., has rapidly become one of the largest book distributors in the countr y. Although they are still at their original location in Palo Alto, California, they distribute books to all 50 sta 7 cumentation of transactions have become common. One potential source of these problems rests with Walker's antiquated accounting syste m, which is a combination of manual procedures supported by stand-alone PC workstati ons. These computers are not networked and cannot share data between departments. A ll interdepartmental communication takes place through hardcopy documents. You have been hired as an independent expert to express an opinion on the appropriaten ess of Walker Books' business processes and internal controls. The expenditure cycle is described nex t. Expenditure Cycle Purchases System The purchases process begins with the purchasing agent, who monitors the levels of bo oks available via a computer terminal listing current inventory. Upon noticing deficiencie sin inventory levels, the agent manually generates four hard copies of a purchase order: one is sent to accounts payable, one is sent to the vendor, one is sent to the receiving de partment, and the last is filed within the department. Vendors will generally ship the products within five business days of the order. When goo ds arrive in the receiving department, the corresponding packing slip always accompanie s them. The receiving department clerk unloads the goods and then reconciles the packi ng slip with the purchase order. After unloading the goods, the clerk manually preparest hree hard copies of the receiving report. One copy goes with the goods to the warehouse, another is sent to the purchasing department, and the final copy is filed in the receiving d epartment In the warehouse, the copy is simply filed once the goods are stored on the shelves. In th e purchasing department, the clerk receives this copy of the receiving report and files it w ith the purchase order. When the accounts payable department receives the purchase order, it is temporarily file d until the respective invoice arrives from the vendor. Upon receipt of the invoice, the acc ounts payable clerk removes the purchase order from the temporary file and reconcilest he two documents. The clerk then manually records the liability in the hard copy account s payable subsidiary ledger. Finally, the clerk files the purchase order and invoice in the o pen accounts payable file in the department. At the end of the day, the clerk prepares a hardcopy journal voucher and sends it to the g eneral ledger department. Once the general ledger department receives the journal vouch er, the clerk examines it for any obvious errors and then enters the relevant data into the department PC to update the appropriate digital general ledger accounts. Cash Disbursements System The accounts payable clerk periodically reviews the open accounts payable file for liabili ties that are due. To maximize returns on invested cash yet still take advantage of vendo Cash Disbursements System The accounts payable clerk periodically reviews the open accounts payable file for liabili ties that are due. To maximize returns on invested cash yet still take advantage of vendo r discounts, the clerk will pull the invoice two days before its applicable due date. Upon fi nding an open accounts payable file in need of payment, the clerk manually prepares ac heck for the amount due as per the invoice. The hard copy accounts payable ledger is al so updated by the accounts payable clerk. The check number, dollar amount, and other p ertinent data are manually recorded in the hard-copy check register. The check is then sent to the cash disbursements department. Finally, the invoice is disc arded as it no longer has any relevant information that hasn't already been recorded else where. When the cash disbursements clerk receives the unsigned check, she examines it to ensure that no one has tampered with any of the information and that no errors have been made. Because she is familiar with all of the vendors with whom Walker deals, she can identify any false vendors or any payment amounts that seem excessive. Assuming everything appears in order, she signs the check using a signature block that displays the name of the assistant treasurer, Tyler Matthews. Only Matthews' signature can validate a vendor check. The cash disbursements clerk then photocopies the check for audit trail p urposes. Once the check is signed, it is sent directly to the supplier. The photocopy of the check is marked as paid and then filed in the cash disbursements department. The clerk then creates a journal voucher, which is sent to the general ledger department. Once the general ledger department receives the journal voucher, the clerk ex amines it for any obvious errors and then enters the relevant data into the department PC to update the appropriate digital general ledger accounts. Required 1- Analyze the internal control weaknesses in the system. (7.5 marks) 2 Redesign a computer based system that resolves the control weaknesses you identified. Explain y our solution. (7.5 marks)