After receiving the purchase requisition from the head of the department the purchasing department validates the requisition and receives bid from different vendors. On selecting the most suitable vendor the team places a verbal order and demands price quotation. In the next step, the team send a pre-numbered purchase order to the head, accounts payable and the receiving department while filing a copy in open purchase order file which is then transferred from open to filled file after receiving confirmation from the receiving department that the item has been received. The accounts department matches the purchase order and vendors invoice and on confirmation sends it to the treasure where the cashier signs over the $10,000 checks while the machine signature are placed on both the checks over and under $10,000.
FIGURE 1: LEVEL 0 DATA FLOW DIAGRAM OF PURCHASE PROCESS
(Source: Author)
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Identified ICW |
Impact |
Recommendation |
Compatibility |
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The internal control weakness of the special order purchase process of the Platinum is identified in its communication mode (Feng et al., 2014). The firm prefers the verbal communication over the documented mode. |
The lack of proper documentation will create problems for the auditors. The lack of documentation will lead to improper financial audit and the results from the audit will lead to devise the financial strategy which will not be suitable for the Platinum (Gallenmore & Labro, 2015). The improper financial strategy will affect the firm’s future run adversely. Additionally, the firm will also lag behind its competition in the market and lose the competitive advantage it might have been enjoying (Cheng, Dhaliwal & Zhang, 2013). |
‘It is advisable that the organisation equips the services of Accounting Information system.’. Adopting the system will offer crucial benefits while mitigating the risks. The accounting information system will automate the purchase process where with human interaction the orders will be placed online (Hassan, Nasir & Khairudin, 2017). After the order will be placed, the system will verify the most suitable vendors for the delivery of the ordered item. The selection of the vendors will depend upon the background of the vendor which will include their goodwill, their customer services, the quality of their offering and other major factors that may affect their services or product. After the verification is done the system will ask for the price quotation from the vendors and then based on its programming determine the most suitable vendor who can offer quality products at the most efficient cost. Another factor that will be measured by the system is the past relation of the vendor with the Platinum. Based on all the factors above, the system will send a pre-purchase order to the vendor to place the order for purchasing of the product (Ismail & King, 2014). After the order is placed the system will circulate the documents to different departments and on receiving the items will verify the delivery item with assistance of human support of the receiving department. The benefit of adopting the system will be that the firm will be upgraded to an automated system of purchasing and reduce the expenditure of the firm’s internal resources that can be better utilised to increase Platinum’s productivity (DeFond & Lennox, 2017). In addition to that Platinum will also have a proper documentation which will enhance the auditing process and the financial strategy development as well. |
The recommended means can be easily integrated with the reengineered It infrastructure of the firm. It is stated because EDI, EFT, electronic forms and barcode scanning can easily be integrated with the accounting information system (Lourenco, 2013). However, it should be kept in mind that the recommended system is purchased from quality vendor whose product supports upgradation process. |
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The manual verification and placing of the order is also a time consuming and effort consuming process which can be better utilised in making the firm’s internal processes more efficient and in the process enhance the firm’s productivity (Skaife, Veenman & Wangerin, 2013). |
The complicated purchase process that involves repetitive process of verification consumes time and effort which could be better utilised in enhancing the firm’s operations. It drags down the organisation and will ultimately lead to low productivity and decreased quality of the firm’s product and service which will adversely affect the goodwill of the organisation. |
It is also recommended that the firm enforces a protocol for written sharing of information that will enhance the reliability of the records and also assist in securing & sustaining the firm’s data that will be used for planning future strategy of Platinum. It will omit the reverification process. The organisation should upgrade itself to digital workplace to attain the above-discussed measures. The digital work place will include sharing of information through digital means such as emails, chats, pop-notifications and broadcast service (Anandranjan, Simmers & Teo, 2014). It will enhance the communication process and also make it more comfortable and easy. The organisation can also adopt different measures, depending on the other needs of the firms for further simplification and enhanced working. |
The digital workplace can even readily cope with the reengineered IT infrastructure because it would have already replaced the paper documents with the electronic forms. Hence. It can be emphasised that the recommended strategies can be readily melded with the reengineered IT infrastructure while keeping the firm’s process functional. |
Table: ICW ASSESSMENT TABLE OF PLATINUM
(Source: Created By Author)
References:
Anandarajan, M., Simmers, C. A., & Teo, T. S. (2014). The Internet and workplace transformation: An introduction. In The internet and workplace transformation (pp. 13-22). Routledge.
Cheng, M., Dhaliwal, D., & Zhang, Y. (2013). Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?. Journal of Accounting and Economics, 56(1), 1-18.
DeFond, M. L., & Lennox, C. S. (2017). Do PCAOB inspections improve the quality of internal control audits?. Journal of Accounting Research, 55(3), 591-627.
Feng, M., Li, C., McVay, S. E., & Skaife, H. (2014). Does ineffective internal control over financial reporting affect a firm’s operations? Evidence from firms’ inventory management. The Accounting Review, 90(2), 529-557.
Gallemore, J., & Labro, E. (2015). The importance of the internal information environment for tax avoidance. Journal of Accounting and Economics, 60(1), 149-167.
Hassan, H., Nasir, M. H. M., & Khairudin, N. (2017). Accounting Information Systems. In SHS Web of Conferences(Vol. 34). EDP Sciences.
Ismail, N. A., & King, M. (2014). Factors influencing the alignment of accounting information systems in small and medium sized Malaysian manufacturing firms. Journal of Information Systems and Small Business, 1(1-2), 1-20.
Lourenco, M. (2013). Keeping up with the pace: VDP. Graphix, 40(8), 30-32.
Skaife, H. A., Veenman, D., & Wangerin, D. (2013). Internal control over financial reporting and managerial rent extraction: Evidence from the profitability of insider trading. Journal of Accounting and Economics, 55(1), 91-110.
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