Bothell Garden Supply (BGS) provides lawn and garden products and services to small shops, nurseries, golf courses, farms and other commercial properties. BGS also allows local residents to tour the grounds and purchase both plants and supplies on site. The Company’sowner has long complained about the limited information available from the company’s traditional pen-and-paper accounting system and has purchased a new accounting system. BGS’s Vice President(VP) of Operations and its Accountant are both responsible for leading the organization’s move to the new accounting system. They have already entered data about customers, vendors, inventory and employees into the accounting system, and conversion to the new processing environment is imminent.
The BGS management team has contacted your consulting team to help resolve its concerns before fully committing the Company to the new system.
1. The managers have not yet prepared system documentation and have not conducted an analysis of how the new system will affect the process and information flows in the company. BGS management believes that without a common understanding of process and information flows across the enterprise, the system will suffer from processing problems. Employees could also misunderstand their job responsibilities, negatively affecting morale.
2. The managers have not set up access controls to the new system. They remain troubled that the new system, absent proper access controls, might create additional risks associated with processing, beyond those mentioned in (1) above.
3. Although the Office Administrators all handle accounting-related duties and participate in shipment fulfillment, management is uncomfortable granting all four of them access to all of the accounting and fulfillment functions in the system. BGS management is open to redesigning any organizational roles, especially if it helps the firm to adapt to the new application and to reduce possible errors and fraud.
BGS management wants you to focus on the purchases and disbursements cycle because it is the company’s most complex transaction cycle. The managers have asked your consulting firm to provide the following services:
a. Review the attached BGS preliminary organization chart (Figure 1) and job descriptions (Figure 2). Based on this information and the attached preliminary process notes gathered by an assistant on your engagement team (Figure 3), diagram the purchases and disbursements cycle using BPM diagrams. The process diagrams should include a top-level process diagram and more detailed diagrams for each sub-process:purchasing, receiving, and disbursement.
b. Identify appropriate roles for purchase, receiving, and disbursement-related functions. BGS management would like you to organize the Office Administrator and other employee roles to minimize the potential for employee errors and fraud.
c. Prepare a memo for BGS management describing the major process design features and user roles you have chosen. Also,for each of the following twelve control objectives, include in the memo at leastone specific control activity (e.g., text input controls, separation of duties)that supports reliable processing purchases/receipts and disbursements:
Transaction- Related Assertion Control Objectives For Purchases / Receiving Control Objectives For Disbursements
Occurrence Recorded purchases are for goods actually received. Cash disbursements are for goods actually received.
Completeness Existing purchase transactions are recorded. Existing cash disbursement transactions are recorded.
Authorization Recorded purchases are authorized by appropriate personnel. Cash disbursements are authorized by appropriate personnel.
“Accuracy” Recorded facts for purchases match the transaction. Recorded facts for disbursements match the transaction.
Cutoff (Timing) Purchase transactions are recorded on their correct dates / in their proper periods. Cash disbursements are recorded on their correct dates / in their proper periods.
Classification Purchases transactions are recorded in the appropriate accounts. Cash disbursements are recorded in the appropriate accounts.