BFA504 Accounting Systems and Processes: Case Of Sunny Beaches Ltd

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BFA504 Accounting Systems and Processes

Question

Answered

Questions:

Section A

This section contains five (5) compulsory case study style Questions. All Questions are to be answered.

Q 1

Sunny Beaches Pty Ltd is a family owned business selling a range of sunscreen products with a low alcohol content suitable for children. The high quality and low alcohol content of the products are very important to Sunny Beaches customers. Their customers are mostly small pharmacies in regional Australia. Products are purchased from approved suppliers.

The purchase department at Sunny Beaches is staffed by Andy and Sam. Andy prepares manual purchase requisitions from the previous week’s daily sales records to ensure ample stock is kept in Sunny Beaches warehouse in Melbourne. Sam processes computerised purchase orders from the requisitions generated by Andy. The owners of the family business trust Andy and Sam completely, and do not authorise any requisitions or orders. Similarly, no reviews and reconciliations are done. The owners of the business have recently read a newsletter from their auditors cautioning against fraud in the COVID-19 era and approached you for advice on their inventory order systems.

Required

Explain in your own words, how the purchase requisition in this case plays an important role in the ordering of inventory. Reference your Parkes et al. text.
Analyse how Andy and Sam prepare/use purchase requisitionsand identify what risks are involved with this process.
Explain what controls should be in place to reduce the risks identified in (b).
Analyse how Sam processes purchase ordersand identify what risks are involved with this process.
Explain what controls should be in place to reduce the risks identified in (d).

Q 2

As a result of the Covid-19 pandemic, the Tasmanian tourism industry has suffered a massive reduction in visitors. The Tasmanian government has decided to support the industry by awarding redeemable e-vouchers to Tasmanians who are planning to spend a minimum of 2 nights, during weekdays only, at approved businesses. There are 200 pre-approved Short-Stay establishments qualifying for inclusion in the scheme, which includes a number of Airbnb’s. A requirement of the scheme is that the Short-Stay businesses must be regional and members of Tourism-Tasmania. Claimants must be Tasmanian residents.

To participate in the scheme, visitors intending to stay at a Short-Stay establishment must register on the Tourism-Tasmania website. Upon registration a ‘once-off’ voucher for $100 per person (2 nights at $50 per night) is recorded. Holders of the vouchers can claim the money back after visiting, and paying the approved establishments. The claims are submitted to the same Tourism-Tasmania website by capturing the name of the establishment and date of stay. The claims are paid directly into the claimant’s bank account, the details of which was captured during the registration process.

The Tasmanian government has become aware of e-Vouchers being sold for a profit on online-retail stores such as Gumtree and eBay. This is against the rules of the scheme. The government is also concerned about other fraudulent actions that may occur in both the online registration and claim processes. You have now been approached to assist the government with implementing application and general controls to reduce the risk of fraudulent behaviour by claimants and approved businesses. The government is particularly concerned about collusion between business owners and claimants to share refunds for visits that never took place.

Required:

Explain in your own words the difference between application controls and general controls by using examples from this case. Reference Parkes et al.

Analyse how the risk of fraudulent registrationsby potential claimants OR Short-Stay businesses may result in fraudulent claims and refunds.
Explain what applicationcontrols should be in place to reduce the risks identified in (b).
Analyse how fraudulent claimsmay be made and identify what risks are involved with this application. Consider collusion between claimants and businesses.
Explain what application controls should be in place to reduce the risks identified in (d).

Q 3

The accounts payable process of William’s World Pty Ltd (WW) is depicted in the document flowchart (Figure 1) that follows.

Narrative of WW’s Payments Process

The accounts clerk of WW captures supplier invoice details in an accounts payable application. The application prompts the accounts clerk to enter an order number. Once payment invoice details have been entered, the computer application performs a reasonableness and completeness check to search the open order for items matched against receiving reports, but not yet matched against an invoice. The accounts clerk confirms the invoice details by matching the open order, line item by line item, against the invoice details previously captured. Adjustments to order and receiving report details can be made to facilitate unit price changes as a result of new price lists.

The application then prepares cheques for the invoice items that are due. If necessary, the application prompts the accounts payable clerk to update master data required to process cheques before printing them out. The invoice, purchase order and receiving report are then forwarded to the Accounts Manager, who cross-checks their details with the amount and payee names on the cheques that the computer prepared. The cheques are then signed and forwarded, along with the remittance advice, to the supplier. The invoice, purchase order and receiving report are then given to the Accounts Clerk who files the documents alphabetically in the Closed Orders file.

Required:

Explain in your own words the importance of segregation of duties as an internal control in the context of this case. Reference Parkes et al.

Analyse the case study for weaknesses in the payments process that increases the risk of fraudulent and/or incorrect payments.

Recommend controls that should be in place to reduce the risks identified in (b).

Q 4

You are working as a senior accountant for Tasmania e-Cycles Pty Ltd. The company buys and sells electric bicycles and accessories from a shop situated in Sandy Bay, Hobart. As a result of the increased popularity of cycling, the business has experienced exponential growth. This resulted in increased administrative processes and increased the risk of errors and fraud in the accounting information system.

You have been instructed by the CEO and owner Jack Daniels to take on the additional role of internal auditing. Jack is particularly concerned about the vulnerability of the online ordering system to cyber hacking and fraud. Jack suggest that your department assume line responsibility for the security of the online ordering system.

Jack requests you make recommendations during system development, assist in the installation, and approve the online ordering system after making a final review. You are concerned about your objectivity and independence in your dual roles as senior accountant and manager of the audit division.

Required:

In business-memo style, respond to John’s suggestion that your department be responsible for the security of the online sales ordering system.Reference your Parkes et al. text in considering your objectivity and independence.

In business-memo style, respond to John’s suggestion that you be responsible for making suggestions during system development. Reference your Parkes et al. text in considering your objectivity and independence.
In business-memo style, respond to John’s request that you assist in the installation of the system and approve the system after making a final review. Reference your Parkes et al. text in considering your objectivity and independence.

Q 5

The CEO of Tasmania e-Cycles Pty Ltd, Jack Daniels, has requested a follow-up meeting with you to discuss the implementation of the proposed online sales order system in Q 4 above. During your meeting, he informs you that he accepted your comments and recommendations and that he will engage the services of a consultant to develop and implement the application. In your response you highlight the importance of documentation during the design, development, and installation phases of the proposed application.

Although Jack is most impressed by the knowledge you gained from your studies in BFA504 at UTAS, he is confused by some of the terminology you used during the meeting. Subsequent to the meeting, he requests you to clarify (a) the nature and purpose of the documentation you referred to in the meeting, (b) who will be responsible for creating it, and (c) at which stage(s) of project development it should be prepared.

Required

Respond to John’s Qs regarding the following systems documentation. Reference your Parkes et al. text in explaining the purpose of the documentation.

(i) Process map

(ii) Context diagram

(iii) Physical data flow diagram

(iv) Logical data flow diagram

(v) Systems flowchart

BFA504 Accounting Systems and Processes

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BFA504 Accounting Systems and Processes

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Section A

Q 1

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Q 2

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Q 3

Narrative of WW’s Payments Process

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Q 4

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Q 5

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