Voltec Welding Machines is a manufacturer of welding machines of various types including TIG, MIG, and ark welders and other electric tools. The companys primary markets are commercial and do it-your self-enthusiasts. It reaches its customers through trade magazines and publishes an industry catalog of welders, plasma cutters, and electric generators. They sell direct to wholesalers and through supply houses and home improvement centers. Their manufacturing facility and distribution center are in Tulsa, Oklahoma, where they employ 120 manufacturing and clerical staff.

Voltec employs a centralized computer system with distributed terminals in the departments. Recently they have been having manufacturing problems and cost over runs. Voltec has hired your auditing firm to assess its operations and internal control procedures. Voltecs conversion cycle is triggered by a report from the finished goods warehouse. The warehouse clerk periodically reviews the inventory records in a search for low stock items. When the quantity on hand of an inventory item in the finished goods warehouse falls below its pre-establish minimum, the warehouse clerk sends a digital inventory status report from the warehouse terminal to production planning and control advising them to schedule a production batch run for the item in question. Upon receipt of the report, the production planning and control department clerk accesses the digital bill of materials and the route sheet files for that item to be produced and adds the production details to the digital production schedule. The system automatically adds are cord to the open workorder file and sends a digital work order to the work-center supervisors terminal and to the cost accounting clerks terminal. The work-center supervisor accesses the work order from his terminal and prints hard-copy move tickets and material requisitions for each stage in the production process. Production employees take the materials requisitions to the storekeeper and secure the components, subassemblies, and raw materials needed to perform their production tasks. If excess materials beyond the standard amount are needed, the supervisor prepares additional materials requisitions. The employees also complete job time tickets after each stage in the process to reflect the time spent on the job. When the employees complete their tasks they send them over tickets and time tickets to the cost accounting department. The storekeeper receives them at erials requisition sand releases them at erials into production. He then updates the raw material inventory records and sends the requisition to cost accounting. When inventories of component parts and raw materials fall to their reorder points, the store keeper prepares purchase order sands ends then to there spective vendors. Vendors deliver raw material inventories directly to the storeroom, at which time the store room clerk inspects them and updates the digital raw materials subsidiary ledger. Each day the storekeeper prepares a journal voucher and posts to the general ledger raw material control account. The cost accounting clerk receives the digital work order and initiates a new WIP account for the batch. During the production process, the clerk receives hard-copy move tickets, materials requisitions, and job tickets from the work centers, which the clerk uses to update WIP account. When production is complete the clerk closes the WIP account for the batch and transfers it to the finished good inventory subsidiary ledger. At the day send, the cost accounting clerk pre-pares a digital journal voucher reflecting the WIP status and any transfers from WIP to finished goods inventory. The clerk then posts the journal voucher to the WIP and FG general ledger control accounts.

Required

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

d. Describe the changes needed to reduce the risks.