The case study of the Platinum Manufacturing company has been focused mainly in this scenario. the company is a medium sized manufacturing company where the main customers are Australian based (Dias et al., 2018). This section has been used for the discussion of the review of the expenditure process of the system which is currently in place for the company. This an overview that summarizes all the main aspects of the expenditure process of the system, the purchase and the issues of the raw materials and receipts generated from the process has been focused upon in this section. For the expenditure process the purchasing team is the sector that is responsible for conducting the process and also they are ones who are involved with the storage of data in the inventory as well. The process starts when the Storeroom supervisors uses the manual counting method to count the raw materials and reorder the materials that are required by the system in situation where the count is below the level maintained by the supervisor for ordering (Ninomiya & Masuda, 2017). A purchase requisition form is obtained by the supervisor and the order for the raw material is made. The supplier from whom the last purchase is made is identified by the purchasing team as the most suitable supplier and the selection is done accordingly. At the beginning of the day the purchasing team clear their mails and also. Firstly, the packing slip is matched so that a purchase is validated and the order file is filed in the pending recipients the tax process in validated with the invoice of the purchase. The corresponding orders on which the purchase order that generally do not have the packing slip is filed in the outstanding items section. This is then again followed up at the end of each month. The item or the quantity of the delivery are also different from that of the purchase orders that are approved. These are generally filed in the sections of the outstanding records (Hayward et al., 2015). Again this is followed up at the end of each month. The invoice is then received directly from the supplier by the purchasing team (Motomura, Causse & Stuthers, 2016). The payment of the invoices is done on the time by the purchasing team and they filed along with the packing slip and the purchase order so that they can be reconciled at the end of each month.
A Data Flow Diagram (DFD) is traditional visual representation of the information flows within a system. The level 0 Data flow diagram the Raw Material Purchasing Process of the Platinum Company is described below:
Figure 1: Data Flow Diagram of the Raw Material Purchasing Process
Source: (created by author)
The table provide below has been used for the description of the identification of the internal control weaknesses, Impact of the weaknesses, control to mitigate the weakness and the latest IT developments that would aid the process which is related to expenditure and the inventory management process of the Platinum Company:
|
Internal Control Weakness |
Impact of the weakness |
Control to mitigate the weakness |
Latest IT development |
|
Unauthorized access to the inventory of the Platinum Company. |
This can hamper the inventory of the company and can possibly lead to depletion of the resources of the organization (DeFond & Lennox, 2017). |
Fence and lock the warehouse |
The latest IT developments include the digitised locking of the warehouse which sends of an alarm automatically if it is breached. |
|
Unorganized inventory system |
In situation where the inventory remains un-managed there are chances that the supervisor would not be able to send the correct information to requisition team and this might lead to an error during the purchasing process of the raw materials (Center, Alliance & Insurance, 2016). |
Organize the inventory |
The latest development in the IT system has enabled the use of the automated systems for the organization, which would them to create an automated tracking system of the raw materials which would allow them to control the flow of the raw materials in the system. |
|
Lack of a proper counting and verification system. |
The Platinum company make the purchase of the raw materials from the outside suppliers and hence they should not take their word for the quantity of the materials delivered to them, if it is done so then the company would incur losses to a great extent (Tangney, BOONE & BAUMEISTER, 2018). |
Count all incoming inventory and Inspect incoming inventory |
IT system are already available that would be helpful in counting and marking the materials delivered to the purchase team. This would enable them to obtain the correct product from the suppliers. |
|
Mismanagement of the small and scarp raw materials |
This might hamper the development of any type of hardware project for the organization. they might miss out on the smaller details of the end product and also it can happen that the smaller items are misplaced. |
Tag all inventory. |
The IT systems would enable the company all their raw materials in their inventory, by using the RFID feature. |
|
Mismatching the raw materials in the warehouse |
There would be a huge chaos in case there is a mismatch in the raw materials that belong to the customers and they might get confused with the products of the customers (Vovchenko et al., 2017). |
This type if IT product would be similar to the RFID products used in the tagging facilities. The IT systems would enable the company all their raw materials in their inventory, by using the RFID feature. |
|
|
Unorganized purchase system of the company |
The unorganized system would be creating a huge confusion within the organization and there would issues in the financial department of Platinum Company (Chan & Vasarhelyi). |
Audit the bill of materials |
The company can integrated some automated transactions software in the system of the organization and this would help them in auditing the payments made by the purchase team automatically. |
|
Obsolete inventory |
The problem of obsolete inventory arises when the warehouse of the company would be filled up with the unwanted or the useless raw materials that would create unnecessary space crunch within the warehouse and also the company would be unable to add any extra equipment required for the development of any projects in the company (Loy et al., 2016). |
Conduct a periodic obsolete inventory review |
There are IT solutions which can be developed for this problem as well. The latest development in the IT system has enabled the use of the automated systems for the organization, which would them to create an automated tracking system of the raw materials which would allow them to control the flow of the raw materials in the system. It the purchase team would be able to track the equipment and would be able to get information about the current status of the equipment. In situation where the equipment remains unused for a long period of time, it would considered obsolete and it would be discarded from the inventory and well as from the data storage. |
|
Mismatch of the scrap products with the raw materials |
There might arise many occasion when a large sized scrap product gets mixed with the original raw materials and hence this would hamper the company in keeping track of a particular product for a particular project (Abbott et al., 2016). |
Record scrap transactions |
The IT products available for the solution to the problem is the same RFID technology. The IT systems would enable the company all their raw materials in their inventory, by using the RFID feature. Additionally, there should be district tagging facility for the scrap products. |
|
Transaction faults |
The impact on the Platinum company is that there would information about the negative inventory in the systems. There would be transactional flaws in the company and this would affect the overall financial situation of the company. The inventory record accuracy would also have hampered to a great extent by the system and this affect the bank balance of the company creating a negative balance for the company (Gallemore & Labro, 2015). |
Investigate negative-balance inventory records. |
The IT solution is already in place for the company to incorporate it into their own systems. The company can integrated some automated transactions software in the system of the organization and this would help them in auditing the payments made by the purchase team automatically. |
|
Improper monitoring of the system. |
The improper monitoring of the equipment of the system would lead to various problems include the mismanagement of the products and also the mismatch of the products (Luckie et al., 2017). Additionally, the products which would be obsolete would be untraceable and might get used in a project and the this might lead to possible risks and a cause a near failure effect on the project. |
Conduct cycle counts |
This solution requires no additional solution as the company has already designed a solution for the counting feature of the inventory product and also the supervisor. |
References
Abbott, L. J., Daugherty, B., Parker, S., & Peters, G. F. (2016). Internal audit quality and financial reporting quality: The joint importance of independence and competence. Journal of Accounting Research, 54(1), 3-40.
Center, P., Alliance, A. M. A., & Insurance, A. M. A. (2016). Practice Management. Safety.
Chan, D. Y., & Vasarhelyi, M. A. (2018). Innovation and practice of continuous auditing. In Continuous Auditing: Theory and Application (pp. 271-283). Emerald Publishing Limited.
DeFond, M. L., & Lennox, C. S. (2017). Do PCAOB inspections improve the quality of internal control audits?. Journal of Accounting Research, 55(3), 591-627.
Dias, A., Rodrigues, L. L., Craig, R., & Neves, M. E. (2018). Corporate social responsibility disclosure in small and medium-sized entities and large companies. Social Responsibility Journal.
Gallemore, J., & Labro, E. (2015). The importance of the internal information environment for tax avoidance. Journal of Accounting and Economics, 60(1), 149-167.
Hayward, R. A., Reaven, P. D., Wiitala, W. L., Bahn, G. D., Reda, D. J., Ge, L., … & Emanuele, N. V. (2015). Follow-up of glycemic control and cardiovascular outcomes in type 2 diabetes. New England Journal of Medicine, 372(23), 2197-2206.
Loy, M. L., Traub, R. D., Zhang, L., Kotala, P., Roemmich, M., Breidenbach, J., & Nelson, R. (2016). Beyond the Use of Robotics: Operations and Supply Chain Control for Effective Inventory Management in a Health System Pharmacy. In Advances in Healthcare Informatics and Analytics (pp. 145-155). Springer, Cham.
Luckie, D. B., Hoskinson, A. M., Griffin, C. E., Hess, A. L., Price, K. J., Tawa, A., & Thacker, S. M. (2017). Integrating Concepts in Biology Textbook Increases Learning: Assessment Triangulation Using Concept Inventory, Card Sorting, and MCAT Instruments, Followed by Longitudinal Tracking. CBE—Life Sciences Education, 16(2), ar20.
Motomura, H., Causse, R., & Struthers, C. D. (2016). First records of the deepwater scorpionfish, Lioscorpius trifasciatus (Setarchidae), from outside Australian waters. Biogeography, 18, 23-28.
Ninomiya, K., & Masuda, H. (2017). U.S. Patent No. 9,836,782. Washington, DC: U.S. Patent and Trademark Office.
Tangney, J. P., BOONE, A. L., & BAUMEISTER, R. F. (2018). High self-control predicts good adjustment, less pathology, better grades, and interpersonal success. In Self-Regulation and Self-Control (pp. 181-220). Routledge.
Vovchenko, G. N., Holina, G. M., Orobinskiy, S. A., & Sichev, A. R. (2017). Ensuring financial stability of companies on the basis of international experience in construction of risks maps, internal control and audit. European Research Studies Journal, 20(1), 350-368.
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