Topic: Threats and controls of the disbursement cycle

Lourdes works at the manufacturing company General Grains, Inc., where she serves as an inventory control employee. One of her tasks is to create orders for the necessary raw materials for manufacturing. Therefore, she periodically checks inventory levels from a computer in her office within the warehouse. Once she identifies the items that need to be restocked, she reviews the list of suppliers, selects one, and creates a purchase order from her computer, adding a new entry to the purchase orders file. Additionally, she prints a copy of the purchase order and sends it via mail to the supplier. As a final step, Lourdes sends an email to the accounts payable officer and the receptionist, providing them with a link that grants access to the purchase order from their respective computer terminals. All company computers are networked to a centralized accounting system, giving all involved parties access to the same information.

When the goods arrive at the company for delivery, the instruction is to bring them to the reception area. The reception employee prints a copy of the original purchase order and cross-references it with the packing slip to ensure that the requested merchandise and quantities are correct. The receptionist creates a goods receipt report from her computer terminal and sends it to the accounts payable officer. Another copy is sent to Lourdes to update her inventory records.

Subsequently, the accounts payable officer receives a printed invoice from the supplier. The officer compares the received invoice with the digital purchase order generated by the inventory control officer and the receptionist's goods receipt report. Additionally, using their computer, the accounts payable officer creates a record in the accounts payable subsidiary ledger and records the liability in the purchases journal. As part of their responsibilities, the accounts payable officer reviews the accounts file and proceeds to pay the invoices, after receiving authorization from the Accounting department manager. The officer generates a check for the owed amount and, using their computer, removes the liability from the accounts payable subsidiary ledger and records the cash disbursement.

1. Identify physical internal control weaknesses in the system. 2. Provide at least three (3) recommendations for the controls that should exist in this accounting information system. Focus your response on the controls that must be incorporated into the digital processes from the time the order is placed until the payment is disbursed. Include in your answer the recommended controls and how they can be applied.