Question

Competency

Assess accounting information systems.

Scenario Information

BeGood Baking Supply is a small bakery supply company formed as a closely held corporation. The company supplies raw baking materials, paper goods, and equipment to restaurants and bakeries in three states in the upper mid-west. Most of its business, however, is located in a large metropolitan area. BeGood wants to increase its presence in the region and serve five states. In fact, the owners of BeGood would like 75% of their business to come from throughout the region rather than the current metropolitan area. In order to do this, the owners understand they must diversify offerings and lines of business.

Currently, BeGood has a phone center where customer orders are taken; these orders are then sent to shipping where the order is filled in its large warehouse and shipped within four days. BeGood outsources its shipping to a local trucking company. Once the order ships all paperwork goes to the accounting department where it is entered into the accounting system. BeGood still uses the same accounting system it has used since the inception of the company. All aging of receivables and other analysis is done using Excel spreadsheets. Purchasing and tracking of inventory are done solely by the warehouse manager. Invoices for inventory purchasing are sent to the accounting department when goods are received.

The owners at BeGood are wondering how they can utilize an online presence and further automate its systems in order to facilitate its growth and diversify its business. The owners may also like to expand into the retail business.

You have been hired as a full-time staff accountant at BeGood Baking Supply and have been given the task of evaluating and recommending a viable accounting information system for the accounting and financial data of BeGood in order to facilitate expansion and diversification. As you begin your research, you realize that many departments are involved in the information system, and communication is key.

BeGood has grown over the years but the AIS has not kept up with that growth, and you believe there may be some internal control issues. Since cost of goods sold is the largest expense of the company, you decide to take a look at inventory control, ordering and receiving first. You have an "uneasy feeling" about the warehouse supervisor, Harold. The Receiving department consists of three employees, including Harold. The two receiving employees unload vendor trucks and stock the goods received. If goods are shorted on an order or defective goods are received, it is brought to light when filling customer orders or when customers complain about product received. After receiving, employees unload trucks and restock goods. The vendor invoice is held in a folder on Harold's desk. Once per week, Harold takes the invoices to accounting for payment.

Requirements

As part of your analysis of the ordering and receiving process, prepare documentation of the following items and the research you find that would ultimately become part of a final presentation of a viable AIS system for management. NOTE: You will not be creating this presentation. These elements of research and documentation are part of the process that would lead up to that final presentation of information.

Documents Required:

A system flowchart of the ordering and receiving process described above

A chart listing the control weaknesses in the current system, along with the fraud that could occur with the weakness, and a solution to the weakness

A system flowchart of a new recommended system addressing each of the control weaknesses identified in the chart

Answer 1

Introduction – The report includes

1. The Value of AIS and how it can be used to facilitate growth at “Be good”
2. Current State of AIS of “Be Good” and its Viability
3. Changes to be made to current AIS of “Be good” in order to support desired growth.

• I. The Value of AIS and how it can be used to facilitate growth at Be good

In order to understand the Value of AIS, it is necessary to understand the advantages of the AIS over the traditional accounting system.

1. AIS helps a firm to maintain business accounts properly and to access the performance of other business processes This visualizes the operational performance of the different departments of “Be good “and to ensure optimal utilization of resources accordingly. It is critical for firms to produce a new range of products in relatively less cost from the competitors. Through this, “Be good” can manage the resources more effectively that ensures the reduction in cost and improvement in quality.
2. AIS is critical to provide insightful information regarding operations and to make informed decisions of resource allocation. “Be good” can compare the performance of a range of products in terms of creating sales. It could help the firm to allocate resources to the profitable segments and to make improvements in operations (Harmon, 2014). In this way, the superior performance of support processes is critical for this firm to ensure better functioning of operational activities and to attain success.
3. Accurate and Reliable Information – Outcome of the Business depends upon the efficiency of operations for allowing “Be good” to grow business and to increase sales. Supportive processes such as accounting are to be performed for providing more accurate and relevant information regarding the performance of each business unit and facilitating a way to identify under and overutilization of resources. This is quite critical for ensuring optimal utilization of resources in “Be good” and to increase efficiency. It makes a positive impact on the ability of a firm to produce more and quality goods by using few resources.
4. The absence of accounting errors - Use of computerized information system helps the “Be good” in the reduction of the manual accounting errors and thus information acquired will be more reliable and accurate. Since information is the key to the growth of the company, it is likely to avoid the manual errors.
5. Cost-Effectiveness - Accounting information system makes the maintenance of a bloated financial department irrelevant. The software does most of the work that would otherwise require several employees. There is also software that can perform functions such as billing budgeting and preparing payroll.

2. Current State of AIS of “Be Good” and its Viability

Currently, all the paperwork goes to the accounting department where it is entered into the accounting system. And the accounts are maintained manually. Since they are on the verge of an expansion of the business, Use of E-commerce is vital for the success of the business. Current AIS is not viable due to the following reasons

1. Manual maintenance of the records
2. Manual generation of key reports like the ageing of receivables and other analysis using excel spreadsheets.

3. Changes to be made to current AIS of “Be good” in order to support desired growth

The outcomes of supportive activities are needed to improve the efficiency of operations for allowing “Be Good” to grow business and to increase sales. Supportive processes such as accounting are to be performed for providing more accurate and relevant information regarding the performance of each business unit and facilitating a way to identify under and overutilization of resources. This is quite critical for ensuring optimal utilization of resources in “Be Good “and to increase efficiency It makes a positive impact on the ability of a firm to produce more and quality goods by using few resources.

For making an informed investment decision, it is critical to analyze system requirements and to ensure the required features or functionalities of the software. Below are required features or functionalities for the system in B Bakers:

1. Data Reporting as Statutory Requirements: The IT system should provide facility to generate financial reports as per the legal requirements and laws. Each country has different laws to regulate financial reporting, which compliance is critical to supply useful accounting information to the investors, suppliers, customers and other stakeholders. The system should allow “Be good” to get financial documents and reports of the specific period within a standardized format. It will be useful to communicate the financial status of the firm with the stakeholders more accurately.
2. Interoperability and expandability: In “Be good”, the system should include interpretability and expandability features like these help in adding more functionality in the existing system as per the changing business requirements. Interoperability feature is critical to ensure the ability of a system to other system or product without any extra efforts. Similarly, expandability feature requires for adding extra capabilities. “Be good” is a growing business that seeks to expand its product range and to take the business another level. It may increase the size of the business and consequently its requirements. Interoperability and expandability features of the system would be useful for “Be good” to add multiple applications to the existing system and to ensure successful system migration.

3. Internet connectivity and security: This feature should also be considered by “Be good” to achieve objectives of investing in IT system. Internet becomes an important way of expanding the business. System’s internet connectivity could be critical for “Be Good” to grow business and due to this, it is a critical feature for this company. The system should facilitate e-commerce connectivity that may help this firm to grow business. Similarly, security is a key feature for a system as loss of data due to an electric fault, system malfunction and hacking can affect the profitability and position of “Be Good” (Hall, 2012). The system should have a feature to protect data from unauthorized use and to any system default. Data backup feature may allow the firm to restore the data anytime.     
4. Historical and Predictive Analysis: At “Be good”, historical and predictive features should be considered, while purchasing a system. The system should allow this firm to analyze historical data and to make the prediction for better planning and controlling. It is required by the firm to develop an in-depth understanding of the efficiency of available resources and to estimate their future performance. The system should also have the capability to evaluate the economic consequence of any decision based on the analysis of historical data and potential circumstances. This functionality of a system can be useful to solve business problems effectively.   
5. Performance Evaluation and Reporting: “Be Good” should also consider performance evaluation functionality in a system as through this it would be able to analyze the function of each source including machinery, human resource and any other asset successfully on a timely basis. This could be useful for this firm to control the performance of resources and to develop optimal results. Through this, the performance of each department can be monitored, measured and controlled in quantitative form.

Thus, “Be good” should consider above-discussed features or functionalities to solve their purpose of investing in the IT system.