Ateneo de Davao University Prelim Case Analysis Accounting Information System 1

Submitted to: Mr. Karlo S. Dalangin

Members: Arbuso, Shiela Mae Areno, Mara Angela Banga, Xandrine C. Barbaso, Noelle Krisha Briones, Mary Louise Enano, Nembrod

July 27, 2013

First Part FLOWCHARTING COMPUTER PROCESS 1. A clerk in the payroll department collects time sheets and enters information into a computer terminal that stores the information into the payroll data storage. 2. A computer program edits the transactions, referencing information from the employee master file and cost center master file and states errors that may have occurred. 3. Information is then entered into another computer terminal that enters the corrections made to edited transactions. 4. The edited transactions are then processed by an update program that posts the transactions to corresponding records in the employee master file and the cost center master file. 5. The edited transactions are then processed by a report program that creates the payroll documents and report documents.

Second Part a. Statement of the problem: Having the current operation structure, how can the company ensure the security against fraudulent transactions? The current division of duties are not properly distributed, Susan and Debbie, a good family friend, both share the same work at the same time Susan is also tasked of auditing their own work arising to self review and familiarity threat, These hindered both Susan and Debbie perform their duties efficiently leading to unnoticed fraudulent activity (lapping). Other minor problems: Operational procedures a. Un pre-numbered invoices b. Monthly bills are not sent to customers, unless failure of payment System Operation a. No system backup b. The System is not integrated b. Areas of Consideration: Companys operational structure which is how the organization divide the task because there is no clear job distribution. Companys operational procedure which is how the employees execute their assigned tasks because some are tasked to share the same work at the same time is tasked to check their own job. The companys computer system is not integrated; they have to input the data in order to update the program.

The company serves the local market with fewer competitors, with orders and prices remain constant for the whole year.

c. Alternative Courses of action: Restructuring of companys operational structure, operational procedures and system operation. a. The creation of internal control Framework, Where the proper audit procedures and controls (pre-numbered sales invoice and sending monthly bills) on Sales, cash receipts transactions and Account receivables and cash balances are followed, and the proper segregation of duties among the workers are implemented, b. Creation of a integrated and backup system Pros: - If this alternative will be followed, the company would provide clear distribution of duties and tasks and the company would have efficient and smooth operations -having an integrated system will provide the companys safety of their assets and important transactions and is secured from any fraudulent transactions Cons: -There will be a lag time before the organization can fully adopt and costly.

Firing Debbie and hiring a more competent and honest employee.

a. Susan sees the companys current structure to be properly operational, firing Debbie and hiring a more competent and honest employee will solve the problem.

Pros: If this alternative course of action is followed, the company can avoid the same fraudulent case to happen again Cons: -Conflict between Debbie and Susan, risking a 10 year old friendship. -Possible that the same fraudulent actions would repeat -Lag time, the new employee have to be trained d. Recommendations and Conclusion We choose ACA1, Restructuring of companys operational structure,

operational procedures and system operation. Having a long term benefit makes it more practical and economical in the long run: First the creation of Internal Control frame work, following the proper audit procedures and control, performing a substantive test on accounts receivable and cash balances, a pre-numbered sales invoice will ensure that the use of the sales invoice is purely for the business transactions. And establishing a structural chart where the individual duties are specifically identified, this will allow specialization and mastery of their work and it would be easier to find the one responsible/accountable in a case of certain errors and the creation of protocols in the event of a fraudulent activities are discovered. Second, the creation of a backup system that would store the

data in times of failure of the main system, lastly creation of a integrated system that will allow system generated transactions and automatic-timely update on the program. -the failure rest on the companys poor operational structure had they implemented a better structure, Susan would perform her audit duty objectively and Debbie would had a lower chance of committing lapping, restructuring is the only sol

e. Learning and Take-Away It is not easy to remain objective in doing your duties at the same time being a good friend. Business is built on trust and cooperation, but it is also necessary that we remain vigilant.