THE CASE T he Tasteless Tea Company (hereafter, Tasteless) is a market leader in the expanding U.S. market for tea (processed tea leaves), tea-related consumer beverage products, and tea- 1 related desserts. Tasteless produces and sells tea bags, tea leaves, iced tea drinks, and a line of premium tea-based ice creams, as well as an innovative combination of premium tea product lines. Tasteless maintains its corporate headquarters in Danbury, Connecticut. The company's business model is to market its products directly to retailers, including super- markets and restaurants, and to individuals using a direct field sales force. For supermarket and restaurant chains, the sale typically is made to the purchasing department/buying division of the retailer. These sales often involve a significant amount of field testing by the direct sales force, giving Tasteless a competitive advantage. Tasteless heavily advertises its products in trade maga- zines and attracts individual sales through advertising in media such as health care magazines. Individual clients include CEOs of Fortune 1000 companies, as well as individuals from coast-to- coast. Management's objective is to establish Tasteless as the most recognized and respected tea brand in the U.S. market, eventually supplanting Lipton Tea as the market leader in tea brand recognition and tea sales in both the higher-end and lower-end tea markets. While Tasteless currently is experiencing some sharp growing pains, the good news is the growing interest in different types of non-traditional beverages, combined with increasingly health-conscious baby boomers and younger adults. These factors have tripled sales over the past five years ending December 31, 2008. At the same time, new local and regional competitors with a bevy of new products are offering fast delivery from local production centers and in some cases lower prices, challenging Tasteless for retail shelf space. Without this shelf space, especially in supermarkets, Tasteless' tea products cannot be retailed on a volume basis. Tasteless has responded to this challenge by developing and marketing new products to either maintain or, in some cases, expand the company's competitive share of retail shelf space in supermarkets. Some of Tasteless' new tea-based products, introduced during the past year, include tea-flavored frappuccinos and premium tea-flavored ice cream sold in the freezer section of supermarkets and in restaurants. Tasteless' biggest challenge is its tea's short shelf life and the negative impact fresh air has on fresh tea leaves. With a shelf life measured in weeks, tea must be moved quickly from production to consumer. This is especially critical for those tea products that are not packaged in vacuum- sealed storage containers; for example, some of the higher margin products include very small portions of high-quality, highly selective tea leaves. From a customer's perspective, the tea may lose some of its aromatic qualities and potency, depending on how long it sits in manufacturing plants or on supermarket shelves; and experienced tea drinkers easily can tell the difference between fresh and stale tea. Tasteless goes to great lengths to ensure the freshness and integrity of its tea products; stale tea is removed immediately and donated to charities. Organization and Sales Structure Corporate headquarters has a central mainframe computer that maintains the general ledger as well as most of the major business databases. All production takes place in local manufacturing processing plants located in Massachusetts, New Jersey, Tennessee, Illinois, Colorado, Washing- ton, and California. Each processing plant has its own minicomputer that is connected to the central mainframe computer. Corporate headquarters processes all customer orders, including orders requiring credit veri- fication. A credit department that reports directly to the corporate treasurer maintains customer master files and determines order verification or rejection. Once customer orders are processed and approved, the corresponding customer order data are transmitted electronically to the minicom- puter at the appropriate local manufacturing processing plant. Tasteless has 20 sales regions, each with approximately 30 sales representatives reporting to a regional sales manager. The regional sales managers report to the corporate director of sales. Tasteless also has a 12-person marketing group located in the corporate headquarters, which reports to the corporate director of marketing. Sales representatives in each regional office are able to store and retrieve data for their assigned customer accounts, using a work station linked to the corporate mainframe. Clerical help in the regional offices prints order reports, credit rejection notices, and customer account inquiries, and mails them to the individual sales representatives. Many sales representatives live a significant driving distance from their regional sales office. Sometimes, the only way for regional sales managers to obtain up-to-date sales information and sales forecast data from sales representatives is to call them. Each regional office maintains manual records of customer shelf space assigned to Tasteless' products; customer sales order information; and sales promotional campaigns, including advertising expenses. The headquarters' mainframe computer stores consolidated, company-wide files for customer account data (for ex- ample, the large supermarket or restaurant chains ordering Tasteless' product lines), including customer order and billing data. Communication between sales managers and the sales representatives primarily has been through mail or by telephone. For example, regional sales managers inform the sales representa- tives of promotional campaigns or pricing discounts by mail or telephone, while sales represen- tatives write up their monthly reports of sales calls and sales forecasts and mail this information to the regional headquarters. These monthly sales reports, including the regional sales managers' summary reports, then are mailed to corporate for marketing review and analysis. Order Processing The existing sales order processing system requires sales representatives to write up hard copy sales order tickets and mail these tickets to headquarters. The sales order tickets are prenumbered and are carbonized with two copies; the sales representative sends the original to headquarters and keeps the second copy for future reference. Approximately 100 workers at corporate headquarters open the daily mail containing the sales order tickets, they then sort, keypunch, and process (on average) 100,000 sales order tickets per week. Batch processing is performed at the end of each business day. Each evening, after any required credit department reviews, the sales order infor- mation listed by customer is transmitted from the mainframe to a minicomputer at each of Taste- less' processing sites. The daily order also specifies by product code the total tea and tea product demand for each production plant. Each production plant, which maintains minimum inventory levels of many of the traditional products sold by the company, first checks existing inventory levels to determine if the inventory is in stock. For those orders not in stock, manufacturing produces the amount and type of tea and tea-related products ordered. If manufacturing does not have a particular inventory item, it takes about five to ten days to receive the raw materials required from vendors. Once a customer's order is ready to be shipped, shipping managers at the processing centers assign the shipments to various transportation carriers based upon competitive bids (for orders where Tasteless pays the freight), or to carriers specified in FOB shipping point orders (typically for supermarket and restaurant chain orders). Rapid growth, fueled by Tasteless' improving image and its expansion into new tea and tea beverage-based products, has put pressure on Tasteless' existing information systems, including the accounting information system. For example, by mid-2008, growth in new products and sales had reached a point where Tasteless was printing new tickets for the sales force each week. For each order, a salesperson filled out a minimum of two forms per account the sales order form and a second form containing required credit approval information for new customers. Some sales representatives have more than 80 individual customers. In the case of orders from supermarket and restaurant chains, some of these chains represent between 100 and 500 retail stores or restau- rants in a single order. The company was choking on paper. As it became bogged down in paper, Tasteless experienced increased delays in the processing of customers' sales orders. At the same time, Tasteless had trouble shipping the right products to the right places on time. Depending upon inventory availability and freight carrier schedules, it was taking between four days and two weeks to process and ship out an order. This was impacting the quality of the processed tea. Also, during calendar year 2008, Tasteless found accounting discrepancies between the manual sales records maintained by the sales force at the regional sales offices and the sales recorded in the sales journal by corporate headquarters. This involved total sales of $1.5 million annually. Recently, Tasteless' supermarket and restaurant customers began demanding more efficient ways of processing sales orders and payments for orders. Many have given Tasteless a deadline of six months to develop a plan that is beneficial to both parties, with an implementation deadline for the end of 2009. Recent Retail Store Chain Acquisition Early in calendar year 2008, Tasteless acquired a competitor with 300 retail outlets. In each respective sales region, the retail stores immediately were transitioned to the closest Tasteless production plant for service. Since these retail stores are small (average size of less than 500 square feet), there is no room to maintain any inventory except what is on display. After the acquisition of these retail stores, Tasteless' operations changed significantly due to the accompa- nying higher volume of sales. Store managers count inventory daily and place orders with the production plant supporting their respective region. The orders are handled in the same manner as orders placed by a sales representative (i.e., sales order tickets filled out by the store manager are mailed to the corporate headquarters for processing). The retail store outlets are not utilizing bar coding technology, even though each packaged product is bar-coded. The retail stores also have not considered just-in-time (JIT), economic order quantity (EOQ) inventory, or any other relevant inventory management techniques to handle levels of on-hand inventory. Summary Information: Sales Order Processing Procedures and Processes For some of the orders from individuals, Tasteless accepts credit card payments that are processed by the sales representatives (when an order is taken, credit information is included on the sales order ticket). Supermarket, restaurant, and certain individual customer sales are handled as an open account after the credit department reviews the customer's credit (in the case of a new customer) and past payment history in the case of existing customers placing new orders). Each customer is assigned a credit limit that is followed strictly when a new order is processed. A sales invoice is included with each shipment, specifying payment terms of net 30 days on open account shipments and invoices. Exhibit 2 shows an example of the sales invoice prepared by the billing department. For open account purchases, the invoice instructs customers to make payments payable to Tasteless Tea Company and to mail them to corporate headquarters. Three mailroom clerks open the daily mail in the company's mailroom, which is monitored by closed-circuit television. Each clerk manually and individually prepares a list of the customer checks received in the daily mail. by clerk, that day. The original copy of this list is sent to the corporate treasurer, one photocopy of this list goes to the corporate controller for bank reconciliation; and one photocopy goes to accounts receivable for processing; the cashier maintains another photocopy of this list for each EXHIBIT 2 Sample of Tasteless Tea Company's Customer Sales Invoice CUSTOMER: Highview Supermarket 223 Highland Boulevard Ossining, NY 10562 Customer Number: 00395 Terms: Net 30 days from invoice date Your Order Number: 598422 Invoice Date: 03/20/08 Order Date: 03/07/08 QTY. ITEM NO. DESCRIPTION UNIT PRICE AMOUNT 100 V3392 8 oz. Vanilla $0.44 $44.00 50 S4456 8 oz. Strawberry $0.44 $22.00 65 L4492 8 oz. Lemon $0.44 $28.60 SHIPPING: $6.50 TOTAL INVOICE: $101.10 Mail payment to: Tasteless Tea Company clerk. In terms of processing, the accounts receivable department records the checks received daily in the cash receipts journal and posts individual collection amounts to the accounts receivable subsidiary ledger, both of which are automated. The mailroom clerks stamp the back of each check For Deposit only to the account of Tasteless Tea Company and prepare the daily deposit slip. The checks and deposit slip are given to the cashier, who deposits the checks each day at the local bank and gives the deposit receipt to the corporate treasurer. In terms of reporting lines, the mailroom clerks report to the cashier who reports to the corporate treasurer. At the retail stores, customers pay for their products at the checkout, using bank debit cards, credit cards, or cash. The store cashier, under the supervision of the store manager, prepares a daily cash report that reconciles the amount of money in the cash drawer from the store opening to the store closing. A standard amount of small bills and coins is maintained in the cash drawer on a daily basis, with the remaining cash sent by overnight express courier to Tasteless' headquar- ters where the cashier counts and eventually deposits the money in the bank. Bank debit card and credit card receipts also are sent to headquarters for processing. The cashier has a staff of three clerks to process the large number of bank debit cards and credit card slips and to ensure Tasteless receives credit for these funds from the corresponding banks and credit card companies. Each of the retail stores manually prepares a sales slip indicating the product code, descrip- tion, and quantity for each customer sale transacted in the store. These sales slips are mailed to headquarters on a daily basis. Using the information contained in the sales slips, a clerk in the controller's department records all of the retail store sales activity in the sales journal and inven- tory control records. For each retail store, the corporate controller reconciles the daily sales activity to the daily cash report described in the previous paragraph and sends a copy to the corporate treasurer. Information Systems and Accounting Information Systems: Background Tasteless is considering implementing new information systems solutions, initially addressing those functions related to the revenue transaction cycle. The company would like a system (in- cluding both hardware and software-related solutions) that expedites order processing by the sales representatives and at the retail stores. Management also would like to make better use of infor- mation systems to support sales and marketing activities and to take advantage of leading-edge information technology. As you can see, the acquisition of the 300 retail stores has placed further strain on the already overburdened accounting information system, especially since management recently installed a budgeting program throughout the company. Management is interested in incorporating the 300 retail stores into the planned accounting information system. Management also recognizes the need to modernize the accounting system and incorporate basic and vital accounting activities to efficiently manage current operations as well as the retail stores recently acquired. The accounting system must be able to support each store's operations as well as the existing direct sales opera- Sales and Marketing Information Systems: Background Sales and marketing are vital to the operation of any business. Orders must be processed and interface both with manufacturing production planning and inventory levels. Sales of products in existing markets must be monitored and new products must be developed for new markets. The company must be able to respond rapidly to changing market and customer demands, the prolif- eration of new products from competing companies, shortened product life spans, changing con- sumer tastes, and new government regulations. Companies need sales and marketing information for product planning, pricing decisions, advertising and other promotional campaigns, forecasting market potential for new and existing products, and determining the most efficient channels of distribution. They also must monitor the efficiency and effectiveness of their distribution system. The regional sales managers and the store managers constantly complain about the lack of timely information, especially sales information, which is necessary for them to effectively manage the areas under their responsibility. Sales managers need sales-related information to plan and monitor the performance of the sales force. Management also needs information on the performance of specific products, product lines, or brands. For example, price, revenue, cost, and sales/volume growth information can be used for pricing decisions, for evaluating the performance of current products, and for predicting the performance of future products. From basic sales and invoice data, a company can produce a variety of valuable information reports to guide sales and marketing. For example, for weekly, monthly, or annual time periods, information can be generated on which retail outlets order the most, the average order amount, the speed at which products move, which salesperson(s) sells the most, which geographic area pur- chases the most volume of a given product, and how current sales of each product compare to its last year's sales volume. Instructions: Please do all the following tasks: 1. For the current system, prepare detailed data flow diagrams (DFD), broken down into three revenue/sales order streams: retail stores, sales representative, and e-commerce, and include order processing through cash receipts. 2. You are asked to help the company to develop the relational database for the company's revenue cycle. Prepare an Entity-Relationship (E-R) diagram for your proposed database design, with the entity defined as the collection and storage of information related to the revenue cycle. 3. Identify internal control weaknesses of the current system. What types of internal controls will be designed to control the weaknesses to provide reasonable assurance that the company's control objectives (safeguarding assets, maintaining adequate records, complying with applicable laws and regulations) are being met. Your analysis should address the COBIT framework for IT control, the COSO Internal Control Integrated Framework, and the COSO Enterprise Risk Management Integrated Framework. 4. Please submit your work as a PDF file via G-classroom. THE CASE T he Tasteless Tea Company (hereafter, Tasteless) is a market leader in the expanding U.S. market for tea (processed tea leaves), tea-related consumer beverage products, and tea- 1 related desserts. Tasteless produces and sells tea bags, tea leaves, iced tea drinks, and a line of premium tea-based ice creams, as well as an innovative combination of premium tea product lines. Tasteless maintains its corporate headquarters in Danbury, Connecticut. The company's business model is to market its products directly to retailers, including super- markets and restaurants, and to individuals using a direct field sales force. For supermarket and restaurant chains, the sale typically is made to the purchasing department/buying division of the retailer. These sales often involve a significant amount of field testing by the direct sales force, giving Tasteless a competitive advantage. Tasteless heavily advertises its products in trade maga- zines and attracts individual sales through advertising in media such as health care magazines. Individual clients include CEOs of Fortune 1000 companies, as well as individuals from coast-to- coast. Management's objective is to establish Tasteless as the most recognized and respected tea brand in the U.S. market, eventually supplanting Lipton Tea as the market leader in tea brand recognition and tea sales in both the higher-end and lower-end tea markets. While Tasteless currently is experiencing some sharp growing pains, the good news is the growing interest in different types of non-traditional beverages, combined with increasingly health-conscious baby boomers and younger adults. These factors have tripled sales over the past five years ending December 31, 2008. At the same time, new local and regional competitors with a bevy of new products are offering fast delivery from local production centers and in some cases lower prices, challenging Tasteless for retail shelf space. Without this shelf space, especially in supermarkets, Tasteless' tea products cannot be retailed on a volume basis. Tasteless has responded to this challenge by developing and marketing new products to either maintain or, in some cases, expand the company's competitive share of retail shelf space in supermarkets. Some of Tasteless' new tea-based products, introduced during the past year, include tea-flavored frappuccinos and premium tea-flavored ice cream sold in the freezer section of supermarkets and in restaurants. Tasteless' biggest challenge is its tea's short shelf life and the negative impact fresh air has on fresh tea leaves. With a shelf life measured in weeks, tea must be moved quickly from production to consumer. This is especially critical for those tea products that are not packaged in vacuum- sealed storage containers; for example, some of the higher margin products include very small portions of high-quality, highly selective tea leaves. From a customer's perspective, the tea may lose some of its aromatic qualities and potency, depending on how long it sits in manufacturing plants or on supermarket shelves; and experienced tea drinkers easily can tell the difference between fresh and stale tea. Tasteless goes to great lengths to ensure the freshness and integrity of its tea products; stale tea is removed immediately and donated to charities. Organization and Sales Structure Corporate headquarters has a central mainframe computer that maintains the general ledger as well as most of the major business databases. All production takes place in local manufacturing processing plants located in Massachusetts, New Jersey, Tennessee, Illinois, Colorado, Washing- ton, and California. Each processing plant has its own minicomputer that is connected to the central mainframe computer. Corporate headquarters processes all customer orders, including orders requiring credit veri- fication. A credit department that reports directly to the corporate treasurer maintains customer master files and determines order verification or rejection. Once customer orders are processed and approved, the corresponding customer order data are transmitted electronically to the minicom- puter at the appropriate local manufacturing processing plant. Tasteless has 20 sales regions, each with approximately 30 sales representatives reporting to a regional sales manager. The regional sales managers report to the corporate director of sales. Tasteless also has a 12-person marketing group located in the corporate headquarters, which reports to the corporate director of marketing. Sales representatives in each regional office are able to store and retrieve data for their assigned customer accounts, using a work station linked to the corporate mainframe. Clerical help in the regional offices prints order reports, credit rejection notices, and customer account inquiries, and mails them to the individual sales representatives. Many sales representatives live a significant driving distance from their regional sales office. Sometimes, the only way for regional sales managers to obtain up-to-date sales information and sales forecast data from sales representatives is to call them. Each regional office maintains manual records of customer shelf space assigned to Tasteless' products; customer sales order information; and sales promotional campaigns, including advertising expenses. The headquarters' mainframe computer stores consolidated, company-wide files for customer account data (for ex- ample, the large supermarket or restaurant chains ordering Tasteless' product lines), including customer order and billing data. Communication between sales managers and the sales representatives primarily has been through mail or by telephone. For example, regional sales managers inform the sales representa- tives of promotional campaigns or pricing discounts by mail or telephone, while sales represen- tatives write up their monthly reports of sales calls and sales forecasts and mail this information to the regional headquarters. These monthly sales reports, including the regional sales managers' summary reports, then are mailed to corporate for marketing review and analysis. Order Processing The existing sales order processing system requires sales representatives to write up hard copy sales order tickets and mail these tickets to headquarters. The sales order tickets are prenumbered and are carbonized with two copies; the sales representative sends the original to headquarters and keeps the second copy for future reference. Approximately 100 workers at corporate headquarters open the daily mail containing the sales order tickets, they then sort, keypunch, and process (on average) 100,000 sales order tickets per week. Batch processing is performed at the end of each business day. Each evening, after any required credit department reviews, the sales order infor- mation listed by customer is transmitted from the mainframe to a minicomputer at each of Taste- less' processing sites. The daily order also specifies by product code the total tea and tea product demand for each production plant. Each production plant, which maintains minimum inventory levels of many of the traditional products sold by the company, first checks existing inventory levels to determine if the inventory is in stock. For those orders not in stock, manufacturing produces the amount and type of tea and tea-related products ordered. If manufacturing does not have a particular inventory item, it takes about five to ten days to receive the raw materials required from vendors. Once a customer's order is ready to be shipped, shipping managers at the processing centers assign the shipments to various transportation carriers based upon competitive bids (for orders where Tasteless pays the freight), or to carriers specified in FOB shipping point orders (typically for supermarket and restaurant chain orders). Rapid growth, fueled by Tasteless' improving image and its expansion into new tea and tea beverage-based products, has put pressure on Tasteless' existing information systems, including the accounting information system. For example, by mid-2008, growth in new products and sales had reached a point where Tasteless was printing new tickets for the sales force each week. For each order, a salesperson filled out a minimum of two forms per account the sales order form and a second form containing required credit approval information for new customers. Some sales representatives have more than 80 individual customers. In the case of orders from supermarket and restaurant chains, some of these chains represent between 100 and 500 retail stores or restau- rants in a single order. The company was choking on paper. As it became bogged down in paper, Tasteless experienced increased delays in the processing of customers' sales orders. At the same time, Tasteless had trouble shipping the right products to the right places on time. Depending upon inventory availability and freight carrier schedules, it was taking between four days and two weeks to process and ship out an order. This was impacting the quality of the processed tea. Also, during calendar year 2008, Tasteless found accounting discrepancies between the manual sales records maintained by the sales force at the regional sales offices and the sales recorded in the sales journal by corporate headquarters. This involved total sales of $1.5 million annually. Recently, Tasteless' supermarket and restaurant customers began demanding more efficient ways of processing sales orders and payments for orders. Many have given Tasteless a deadline of six months to develop a plan that is beneficial to both parties, with an implementation deadline for the end of 2009. Recent Retail Store Chain Acquisition Early in calendar year 2008, Tasteless acquired a competitor with 300 retail outlets. In each respective sales region, the retail stores immediately were transitioned to the closest Tasteless production plant for service. Since these retail stores are small (average size of less than 500 square feet), there is no room to maintain any inventory except what is on display. After the acquisition of these retail stores, Tasteless' operations changed significantly due to the accompa- nying higher volume of sales. Store managers count inventory daily and place orders with the production plant supporting their respective region. The orders are handled in the same manner as orders placed by a sales representative (i.e., sales order tickets filled out by the store manager are mailed to the corporate headquarters for processing). The retail store outlets are not utilizing bar coding technology, even though each packaged product is bar-coded. The retail stores also have not considered just-in-time (JIT), economic order quantity (EOQ) inventory, or any other relevant inventory management techniques to handle levels of on-hand inventory. Summary Information: Sales Order Processing Procedures and Processes For some of the orders from individuals, Tasteless accepts credit card payments that are processed by the sales representatives (when an order is taken, credit information is included on the sales order ticket). Supermarket, restaurant, and certain individual customer sales are handled as an open account after the credit department reviews the customer's credit (in the case of a new customer) and past payment history in the case of existing customers placing new orders). Each customer is assigned a credit limit that is followed strictly when a new order is processed. A sales invoice is included with each shipment, specifying payment terms of net 30 days on open account shipments and invoices. Exhibit 2 shows an example of the sales invoice prepared by the billing department. For open account purchases, the invoice instructs customers to make payments payable to Tasteless Tea Company and to mail them to corporate headquarters. Three mailroom clerks open the daily mail in the company's mailroom, which is monitored by closed-circuit television. Each clerk manually and individually prepares a list of the customer checks received in the daily mail. by clerk, that day. The original copy of this list is sent to the corporate treasurer, one photocopy of this list goes to the corporate controller for bank reconciliation; and one photocopy goes to accounts receivable for processing; the cashier maintains another photocopy of this list for each EXHIBIT 2 Sample of Tasteless Tea Company's Customer Sales Invoice CUSTOMER: Highview Supermarket 223 Highland Boulevard Ossining, NY 10562 Customer Number: 00395 Terms: Net 30 days from invoice date Your Order Number: 598422 Invoice Date: 03/20/08 Order Date: 03/07/08 QTY. ITEM NO. DESCRIPTION UNIT PRICE AMOUNT 100 V3392 8 oz. Vanilla $0.44 $44.00 50 S4456 8 oz. Strawberry $0.44 $22.00 65 L4492 8 oz. Lemon $0.44 $28.60 SHIPPING: $6.50 TOTAL INVOICE: $101.10 Mail payment to: Tasteless Tea Company clerk. In terms of processing, the accounts receivable department records the checks received daily in the cash receipts journal and posts individual collection amounts to the accounts receivable subsidiary ledger, both of which are automated. The mailroom clerks stamp the back of each check For Deposit only to the account of Tasteless Tea Company and prepare the daily deposit slip. The checks and deposit slip are given to the cashier, who deposits the checks each day at the local bank and gives the deposit receipt to the corporate treasurer. In terms of reporting lines, the mailroom clerks report to the cashier who reports to the corporate treasurer. At the retail stores, customers pay for their products at the checkout, using bank debit cards, credit cards, or cash. The store cashier, under the supervision of the store manager, prepares a daily cash report that reconciles the amount of money in the cash drawer from the store opening to the store closing. A standard amount of small bills and coins is maintained in the cash drawer on a daily basis, with the remaining cash sent by overnight express courier to Tasteless' headquar- ters where the cashier counts and eventually deposits the money in the bank. Bank debit card and credit card receipts also are sent to headquarters for processing. The cashier has a staff of three clerks to process the large number of bank debit cards and credit card slips and to ensure Tasteless receives credit for these funds from the corresponding banks and credit card companies. Each of the retail stores manually prepares a sales slip indicating the product code, descrip- tion, and quantity for each customer sale transacted in the store. These sales slips are mailed to headquarters on a daily basis. Using the information contained in the sales slips, a clerk in the controller's department records all of the retail store sales activity in the sales journal and inven- tory control records. For each retail store, the corporate controller reconciles the daily sales activity to the daily cash report described in the previous paragraph and sends a copy to the corporate treasurer. Information Systems and Accounting Information Systems: Background Tasteless is considering implementing new information systems solutions, initially addressing those functions related to the revenue transaction cycle. The company would like a system (in- cluding both hardware and software-related solutions) that expedites order processing by the sales representatives and at the retail stores. Management also would like to make better use of infor- mation systems to support sales and marketing activities and to take advantage of leading-edge information technology. As you can see, the acquisition of the 300 retail stores has placed further strain on the already overburdened accounting information system, especially since management recently installed a budgeting program throughout the company. Management is interested in incorporating the 300 retail stores into the planned accounting information system. Management also recognizes the need to modernize the accounting system and incorporate basic and vital accounting activities to efficiently manage current operations as well as the retail stores recently acquired. The accounting system must be able to support each store's operations as well as the existing direct sales opera- Sales and Marketing Information Systems: Background Sales and marketing are vital to the operation of any business. Orders must be processed and interface both with manufacturing production planning and inventory levels. Sales of products in existing markets must be monitored and new products must be developed for new markets. The company must be able to respond rapidly to changing market and customer demands, the prolif- eration of new products from competing companies, shortened product life spans, changing con- sumer tastes, and new government regulations. Companies need sales and marketing information for product planning, pricing decisions, advertising and other promotional campaigns, forecasting market potential for new and existing products, and determining the most efficient channels of distribution. They also must monitor the efficiency and effectiveness of their distribution system. The regional sales managers and the store managers constantly complain about the lack of timely information, especially sales information, which is necessary for them to effectively manage the areas under their responsibility. Sales managers need sales-related information to plan and monitor the performance of the sales force. Management also needs information on the performance of specific products, product lines, or brands. For example, price, revenue, cost, and sales/volume growth information can be used for pricing decisions, for evaluating the performance of current products, and for predicting the performance of future products. From basic sales and invoice data, a company can produce a variety of valuable information reports to guide sales and marketing. For example, for weekly, monthly, or annual time periods, information can be generated on which retail outlets order the most, the average order amount, the speed at which products move, which salesperson(s) sells the most, which geographic area pur- chases the most volume of a given product, and how current sales of each product compare to its last year's sales volume. Instructions: Please do all the following tasks: 1. For the current system, prepare detailed data flow diagrams (DFD), broken down into three revenue/sales order streams: retail stores, sales representative, and e-commerce, and include order processing through cash receipts. 2. You are asked to help the company to develop the relational database for the company's revenue cycle. Prepare an Entity-Relationship (E-R) diagram for your proposed database design, with the entity defined as the collection and storage of information related to the revenue cycle. 3. Identify internal control weaknesses of the current system. What types of internal controls will be designed to control the weaknesses to provide reasonable assurance that the company's control objectives (safeguarding assets, maintaining adequate records, complying with applicable laws and regulations) are being met. Your analysis should address the COBIT framework for IT control, the COSO Internal Control Integrated Framework, and the COSO Enterprise Risk Management Integrated Framework. 4. Please submit your work as a PDF file via G-classroom