Part A: Systems Documentation

Describe about the Accounting System for Activities of Different Business.

Role of information systems are very important in present day organisations.Every organization uses accounting system to manage the revenue, operating cost, and other financial activities of the business. But, there are different risks arises to manage the activities of the business operation (Hall, 2012). This report presents the Context, Level 0 (logical) data flow diagrams (DFD), and process map with respect to the JK Saddlery. These diagrams are effective to understand the cashiering process of JK Saddlery. Moreover, this report also discusses the different risks that exist in the cashiering process of JK Saddlery. It also evaluates the control plan to address the risks with regards to JK Saddlery.

1. Context and Level 0 (logical) data flow diagrams (DFD)

Context Diagrams 

                                                                                                                           

Data Flow Diagram

Assumption s

It is assumed that two receipt books maintain by the cashier like one for received cash and checks, and the other is for credit card receipts.

It is assumed that there is no direct relationship between the salesperson and banks.

Assumption

It is assumed that unique stock ID prepared by the sales order that contains all of the details about the items being bought.

Another assumption is that cashier emails the receipts back to the customers.

1. Risks present in cashiering process of JK Saddlery

There are several types of risk involved in cashiering process. These risks are associated with cash account balance, sales transaction, credit transaction, cash receipts, invoices, email system and banking transactions. JK Saddlery appointed only one cashier to handle the cash process related with the retail store and business. As a result, there are higher risks to maintain the cash account because of only one person is available to make cash transaction. All cash transaction included in the financial statement. But, sometimes, the transaction may be entered that have not occurred (Fairclough, 2013). For example, the cashier makes entry of sales that have not occurred due to the workload.

Moreover, all transactions and events are recorded in the account of JK Saddlery. But, there is higher risk, in case; cashier does not record the transaction in the financial statements. For example, sale occurring but not recorded in the financial statement because of distraction in the retail shop. Data accuracy related to the transaction and events is essential for the company. But, there is risk associated with data entry errors. This type of risk occurred due to misrepresenting the effect of events and materiality mistake in the financial statements (Miller, 2015). For example, cashier enters the incorrect data like wrong dollar amount and wrong amount of quantity.  

Part B: Risk Analysis

Along with this, all transactions and events have been reported in the correct reporting period. But, sometimes, transactions have been recorded in the wrong period by the cashier of JK Saddlery. For instance, sales from the next period pushed into this period. Further current period expenses pushed into the next period. All transactions and events have been recorded in the correct accounts. However, the risk arises due to misclassified items that enable to distort the financial statements of the organization (Kooijmans, et al., 2012). For example, expenses that classified as an asset improvement would overstate the assets and understate the expenses.

Moreover, JK Saddlery maintain two books like cash receipts and credit receipt but there is risk involved, in case, cashier records the cash transaction into the credit receipts and credit transaction into the cash receipts. Further, another risk arises in maintaining the receipt books. JK Saddlery maintains the book like cash and checks sales and other is credit sales. But, the risk arises when cashier of company record check transaction into the cash and cash transaction into the credit. Along with this, Cashiers can mistake to record the selling price (Miller, 2015). Because of rush in the retail store. Hence, it will decline the customer loyalty towards their organization.

There is two broad classifications of the control plan that addresses the risk of JK Saddlery. Theses control plan are preventing, detecting and corrective control plan. Another is input, processing and output control plan. A preventive control plan is designed to reduce the errors and irregularities that occurred in the organization like input control (Williams, 2010). Furthermore, detective controls will not prevent errors from occurring but they alert to people those using the system to reduce the errors and anomalies like reconciliations, independent reviews and batch totals.  

Furthermore, JK Saddlery can use the automated process to verify that transactions have been taken place. Further, it can use the Ledger accounting process to check the missing transaction and events (Ayam, 2015). It also uses Enterprise Resource Planning in place to check the data as it enters the accounting system.

Moreover, JK Saddlery can use the eXtensible Business Reporting Language (XBRL) in place to provide reasonable assurance that transactions have been correctly included in the existing accounting period. It is beneficial for JK Saddlery to record accurate transactions in less time because this system is based on paperless reporting (Dawson, 2015). It can also use online banking to monitor the classification of transaction and events and provides reasonable assurance as to correct application of AASB classification requirements.

Conclusion

JK Saddlery can use the computerized accounting information system that used to proper authorization, proper recording, completeness, and timeliness. JK Saddlery can use the segregation of duties and responsibilities of the employees at the workplace. In such case, individual employees cannot make any fraud without being detected (Ayam, 2015).  JK Saddlery may use the standardized forms to record the data.

Further, it can use the sequencing procedure to check the data. Because sequence process helps to assist that whether risks is involved. Besides this, JK Saddlery can use the different methods of documentation such as narrative description, questionnaire, and checklist, flowcharts and control matrix to ensure that documentation cashiering process is accurate. JK can use the reconciliation. Because, this method had used to record the transaction, documentation and follow up of bank reconciliation statements for better efficiency. Further, JK Saddlers can use the reconcile bank account to major cash handling deposit (Wiegers and Beatty, 2013). In this process, company reconciles and verifies the register to maintain the balance of beginning and ending stock.     

Though, JK Saddlery uses good cash management as the compnay deposited the cash in banks every day. But, there is need to develop the control plan in order to make efficient and effective work system and to prevent the theft at the workplace (Zhang, 2015). As per the control plan, the company will never engage the same person to collect the cash and maintain the account.     

Conclusion

It is concluded that context diagram and DFD diagram represent the cashiering process of JK Saddlery. The context diagram shows the overview of data flow whereas Level 0 data flow diagram provides an overarching view of the cashiering processes that occurred in the JK Saddlery. Furthermore, it is summarized that process map is a simple graphical representation of the cashiering process of JK Saddlery. Different risks are also evaluated that involved in the cashiering process of the JK Saddlery. Further, in this report, different control plan is discussed that can use the JK Saddlery to address the risks associated with the cashiering process.

References

Ayam, J. R. A. (2015) An Analysis of Revenue Cycle Internal Controls in Ghanaian Universities. Case Studies in Business and Management, 2(2), pp. 1.

Dawson, S. (2015) Internal Control/Anti-Fraud Program Design for the Small Business: A Guide for Companies NOT Subject to the Sarbanes-Oxley Act. USA: John Wiley & Sons.

Fairclough, N. (2013) Critical discourse analysis: The critical study of language. UK: Routledge.

Hall, J. A. (2012) Accounting Information Systems. 8^th edn. USA: Cengage Learning.

Kooijmans, A. L., Ramos, E., Greef, N.D., Delhumeau, D., Dillenberger, D.E., Potter, H., and Williams, N. (2012) Transaction Processing: Past, Present, and Future. New York: IBM Redbooks.

Miller, R. L. (2015) Cengage Advantage Books: Fundamentals of Business Law Today: Summarized Cases. 10^th edn. USA: Cengage Learning.

Wiegers, K., and Beatty, J. (2013) Software requirements. Australia: pearson Education.

Williams, R. T. (2010) An Introduction to Trading in the Financial Markets: Global Markets, Risk, Compliance, and Regulation. USA: Academic Press.

Zhang, X. (2015) Standards for Enterprise Management Control. Berlin: Springer.