Spice Is Right Imports (Standalone PC-Based Accounting System)

Spice Is Right was established in 1990 in Boston, where it began importing exotic spices and cooking sauces from India and China. The company distributes these specialty foods to ethnic food shops, cafés, and restaurants across the country. In addition to its Boston headquarters and warehouse, the company has a distribution center in Elizabeth, New Jersey. Spice Is Right currently employs over 100 people, has dozens of suppliers, and trades in hundreds of ethnic and exotic foods from all over the world.
Recently Spice Is Right has been receiving complaints from customers and suppliers about billing, shipping, and payment errors. Management believes that these complaints stem, in part, from an antiquated computer system. Spice’s current information system includes manual procedures supported by independent (nonnetworked) PCs in each department, which cannot communicate with each other. Document flows between the departments is entirely in hard-copy form. The following is a description of its revenue cycle at the Boston headquarters office.
Sales Procedures

Spice Is Right’s revenue cycle begins when a customer places an order with a sales representative by phone or fax. A sales department employee enters the customer order into a standard sales order format using a word processor installed on a PC to produces six documents: three copies of sales orders, a stock release, a shipping notice, and a packing slip. The accounting department receives a copy of the sales order, the warehouse receives the stock release and a copy of the sales order, and the shipping department receives a shipping notice and packing slip. The sales clerk files a copy of the sales order in the department.
Upon receipt of the sales order, the accounting department clerk manually prepares an invoice and sends it to the customer. Using data from the sales order, the clerk then enters the sale in the department PC and records the sale in the sales journal and in the AR subsidiary ledger. At the end of the day, the clerk prepares a hard-copy sales journal voucher, which is sent to the general ledger department.
The warehouse receives a copy of the sales order and stock release. A warehouse employee picks the product and sends it to the shipping department, along with the stock release. A warehouse clerk updates the inventory records on the warehouse PC and files sales order in the warehouse. At the end of the day, the clerk prepares a hard-copy AR account summary and sends it to the general ledger department.
The shipping department receives a shipping notice and packing slip from the sales department. The shipping notice is filed. Upon receipt of the stock release, the shipping clerk prepares the two copies of a bill of lading using a word processor. The bills of lading and the packing slip are sent with the product to the carrier. The clerk then files the stock release in the department.
The general ledger clerk posts the journal voucher and inventory summary to the general ledger, which is stored on the department PC; the clerk then files these documents in the general ledger department.

Cash Receipts Procedure

The mailroom has five employees who open and sort all mail. Each employee has two bins, one for remittance advices and one for checks. Before separating the two documents and putting them in their respective bins, the clerks reconcile the amounts on the checks and remittance advices.
The remittance advices are sent to the accounting department, where a clerk records each remittance advice on a remittance list. The remittance list is then sent to the cash receipts department. Using the remittance advices, the accounting clerk updates the customer accounts receivable on the department PC and files the advice in the department. At the end of the day the clerk prepares an account summery on the PC. A hard copy of the summary is sent to the general ledger department.
The mailroom clerk sends the checks to the cash receipts department, where a clerk endorses each check with the words “For Deposit Only.” Next, the clerk reconciles the checks with the remittance list and records the cash receipts in the cash receipts journal on the department PC. Finally, the clerk prepares a deposit slip and sends it and the checks to the bank.
The general ledger posts the AR summary to general ledger and files it in the general ledger department.

Required:

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Identify the internal control weaknesses in the system. Use the six categories of physical control activities specified in COSO for your analysis.

d. Prepare a system flowchart of a redesigned computer based system that resolves the control weaknesses that you identified in “c” above.

Not all groups or organizations are equally political. Some are different from others changing from organisation to organisation.
The following factors contribute to the political behaviour:

Individual Factors: Employees who posses high self montior, strong focus of internal control, are likely to contribute political behaviour.They tend to maipulate the situation. An individuals competency to get sucessful in an organisation tends him to do political actions.

Organizational Factors: When an organisartions resources are declining,when the existing pattern in an organisation is changing or there are chances of getting promoted there are fair chances of politics.The less trust in the organisation the high chances of political actions.

Role ambiguity: It occurs when the prescribed behaviour of an employee is unclear. The more chance of anbiquety less chance of being visibledue to political actions to hide the traits.

The zero-sum approach: This trait is an outcome of the process if i win you lose. The status the winner gains is highlighted making the loser look bad infront of others.

Democratic Decison Making: Going angainst the will and decisons of other managers ccontribute to political conflicts within the oorganisations.

High Performance pressure: The more pressure you put on the employees more chances to do fraud and political tricks.

Political activity is probably more a function of the organization’s characteristics than of individual difference variables.The act of giving employees the power to make decisions, rewarding employees for strong performance and appointing employees who perform strongly to supervise other employees.Managers find it difficult to point out the political treaits of their subordinates making them do errors int he work. Strict supervison is required to find out such frauds within the organisations.