When the goods arrive from the vendor the ware-house clerk reviews the packing slip, restocks the ware-house shelves, and updates the stock records from the Purchasing ProcessPC. At the end of the day the clerk prepares a hard-copy The purchasing agent monitors the inventory levelspurchases summary from the PC and sends it to the by reviewing the inventory subsidiary ledger fromtreasury clerk for posting to general ledger.The vendor's invoice is sent to the accounting clerk. to be replenished and selects a supplier. He then entersShe examines it for correctness and files it in a tempo- this information into the computer terminal to createrary file until it is due to be paid. The clerk reviews the a digital purchase order. The computer teminal gener-temporary file daily looking for invoices to be paid. ates three hard copies of the purchase order. The pur-Using the accounting department PC, the clerk prints a chasing agent sends one copy to the supplier, one copycheck and records it in the digital check register. She to the accounts payable department where it is filedthen files the invoice and mails the check to the supplier. temporarily, and files the third copy in the purchasingAt the end of the day she prints a hard-copy journalvoucher from the PC, which summarizes the day's cashdisbursements, and sends it to the treasury clerk for post- ment inspects and verifies them using the packing slip,ing to the general ledger.Using the department PC, the treasury clerk posts the manually prepares two hard copies of a receiving report.journal voucher and purchases summary information to One copy accompanies the goods to the warehouse forthe appropriate general ledger accounts.his department computer. He decides which items needdepartment.When the goods are received, the receiving depart-which is attached to the goods. The receiving clerkstorage. The receiving clerk sends the second copy tothe purchasing agent who uses it to update the inventorysubsidiary ledger and to close the open purchase order.The purchase agent then files the receiving report in thedepartment.Requireda. Create a data flow diagram of the current system.b. Create a system flowchart of the current system.c. Analyze the intemal control weaknesses in thesystem. Model your response according to the sixcategories of physical control activities specified inSAS 78/COSO.Accounts Payable and Cash 1. Smith's Market (Small Business CashSales Accounting System)In 1989 Robert Smith opened a small fruit and vegeta-ble market in Bethlehem, Pennsylvania. Originally chases of products for resale have continued to rise.Smith sold only produce grown on his family fam Although the company does not prepare auditedand orchard. As the market's popularity grew, however, financial statements, Robert Smith has commissionedhe added bread, canned goods, fresh meats, and a lim- your public accounting fim to assess his company'sited supply of frozen goods. Today Smith's Market is a sales procedures and internal controls. Smith's Marketfull-range farmers' market with a strong local customer expenditure cycle procedures are described below:base. Indeed, the market's reputation for low prices andhigh quality draws customers from other Pennsylvania Expenditure Cyclecities and even from the neighboring state of New The expenditure cycle begins in the warehouse adjacentJersey. Currently Smith's has 40 employees. These to the market where Smith's keeps their inventory ofinclude sales staff, shelf stockers, fam laborers, shiftsupervisors, and clerical staff. Recently Smith hasnoticed a decline in profits and sales, while his pur-250PART IITransaction Cycles and Business Processesnonperishable goods such as canned goods and paper Elizabeth, New Jersey. Spice Is Right currently employsproducts. They also maintain a one-day inventory of pro- over 100 people, has dozens of suppliers, and trades induce and other perishable products in the warehouse hundreds of ethnic and exotic foods from all over thewhere they can quickly restock the shelves when neces- world.sary. At close of business each evening the warehouseRecently, Spice Is Right has been receiving com-clerk reviews the market shelves for items that need to be plaints from customers and suppliers about billing, ship-replenished. The clerk restocks the shelves and adjusts ping, and payment errors. Management believes thatthe digital stock records accordingly from the warehouse these complaints stem, in part, from an antiquated com-PC. At this time the clerk takes note of what needs to be puter system. Spice's current information systemreordered from the suppliers and prints purchase orders includes manual procedures supported by independentfrom the PC. Depending upon the nature of the product (non-networked) PC in each department, which cannotand urgency of the need, the clerk either mails the pur- communicate with each other. Document flows betweenchase order to the supplier or orders by phone. Phoneorders are followed up by faxing the purchase order tothe supplier.the departments is entirely in hard-copy form. The fol-lowing is a description of their expenditure cycle at theBoston headquarters office.

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Flowchart: A flowchart can be defined as a diagram which characterizes the process, workflow or an…

mines it for correctness and files it in a temp0- until it is due to be paid. The clerk reviews the ry file daily looking for invoices to be paid. ne accounting department PC, the clerk prints a nd records it in the digital check register. She