UCSI UNIVERSITY
Faculty of Business and Management
BA201/BBA2044 Accounting Information System
Special Exercises 2
QUESTION 1
The following information describes the procedures of Walid Manufacturing Company regarding
its internal control over the purchase, receipts, storage and issue of raw materials. The process in
Walid Manufacturing Company begins with the production department requesting raw materials
from the storeroom department. Raw materials are removed from the storeroom in written or oral
authorization from one of the production foreman. Due to no proper perpetual inventory records,
a physical inventory count is taken monthly by the storeroom clerks. After physical count, the
storeroom supervisor matches quantities counted against a predetermined reorder level. If the
count is below the reorder level, the supervisor will fill in a material requisition list.
Required
(a) Prepare a system flowchart of the existing system of Walid Manufacturing Company.
(b) Explain the following terms.
(i) AP Pending File
(ii) Check Register
(iii) Open AP File
(iv) Valid Vendor File
(v) Voucher Payable System
(c) Explain FOUR (4) symbols that normally used in Data Flow Diagram.
QUESTION 2
DIDI Manufacturing Sdn Bhd is a medium size manufacturing company producing toy figurines.
There are three processes at the manufacturing area. These are moulding, assembly and packaging
lines with each line is monitored by a line supervisor. The production schedule is normally issued
to the line supervisors two weeks before the actual production run. The company has a policy of
keeping no inventory of raw materials. This policy is to control the overhead cost, thus making
DIDI product more price-competitive. The production process begins with a procurement process.
Line supervisors, upon receiving copies production schedule, determine the type and calculate the
Dr.MAA
Jan-Apr 2024
amount of materials needed for each production run. Each of the supervisor later verbally informs
the purchase department for the materials required. Each line supervisor later contacts regular
supplier and issues a 2-copy of purchase orders. The top copy is sent to the supplier and the second
copy is sent to the purchase department. When the materials are received, a storeroom clerk signs
a supplier’s delivery note. He does not check the consignment because there is no procedure
requiring him to do so. The delivery note normally contains a reference to the DIDI’s purchase
order number. The storeroom clerk notes down on a piece of paper, the delivery note number and
the purchase order reference number as written on the delivery note. The piece of paper is later
sent to purchase department. The storeroom clerk then files the delivery note for future reference.
Irina from purchase department takes her copy of the purchase order and staples the document
together with the storeroom’s note and files them. She later calls the relevant supervisors to inform
that the materials are ready to be collected. When a supplier invoice is received by the account,
Ali, the account manager issues a 2-copy payment voucher and signs a cheque to pay for the
materials ordered. He then sends the remittance advice to the supplier. The second copy of the
payment voucher is kept in the account department.
Required:
(a) Discuss FIVE (5) internal control weaknesses of DIDI’s procurement process and propose
FIVE (5) recommendations to improve the system of the company. Your answers should
be written in the following format:.
Weaknesses Recommendations
(b) Explain the functions of the following documents.
(i) Check register
(ii) Blind copy purchase order
(iii) Purchase requisition
(iv) Purchase order
(v) Voucher register
(c) In expenditure cycle, the traditional approach like economic ordering quantity (EOQ) is used
to maintain sufficient buffer stock for the production. Discuss briefly any TWO (2) costs
relating to EOQ approach.
Dr.MAA
Jan-Apr 2024
