Essay ACCY6004 – Accounting Information Systems – Freedom Ltd Case Study – Management Assignment Help

Assignment Task

Learning outcomes covered in Assessment: LO 3: Evaluate internal control systems and their interrelationship with IT risk management.

CASE BACKGROUND
Freedom Ltd.
You are familiar with Freedom Limited (Freedom). Freedom implemented the integrated enterprise system SAP across all departments including Finance, Human Resources, Production, Purchasing and Sales.
Due to the pace of ongoing expansion, there are increasing costs associated with lack of internal controls. John Freedom, the CEO of the company is aware of the necessity of implementing an internal control system to achieve the objectives of operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations. The new internal audit team hasjust been set up. As a team member of the internal audit team, you are assigned to conduct the following internal audit tasks. You are also responsible for implementing an effective internal control system for the company going forward.

Audit Task One: Purchases/Expenditure Cycle
There is currently one purchaser. In most cases he periodically enters purchase orders in the system to regular suppliers. However, when the production department needs different goods or services, they just ask the purchaser to add the supplier to the system and send an order. He then receives the invoices by email and enters them in the system which notifies the accounts payable clerk in Finance. When the purchaser is on leave, the production manager temporarily covers him by using the purchaser’s credentials to login. Once payables are processed by the clerk, a cheque is mailed to the supplier’s address. A report is run twice a year by Finance to provide an overview of payables activity.

Audit Task Two: Sales/Revenue Cycle
The administrative offices are located in a central city building, while the production, shipping and receiving departments are housed in a renovated warehouse on the edge of the city. Customers place orders on the company’s website, by email or telephone. 80% of sales are on credit which are accounted for $32 million. During the past year, sales have increased dramatically, but 5% of credit sales have had to be written off as uncollectible, including several large online orders to first-time customers who denied ordering or denied receiving the goods.