Local Community College.

The local college requires that each student complete an online registration request form. The system checks the accounts receivable subsystem to ensure that no fees are owed. Next, for each course, the system checks the student transcript to ensure that he or she has completed the course prerequisites. Then the system checks class availability and if there is room adds the student’s Social Security number to the class list.

The report back to the student shows the result of registration processing: If the student owes fees, a bill is sent and the registration is rejected. If prerequisites for a course are not fulfilled, the student is notified and that course is not registered. If the class is full, the student request is annotated with “course closed.” If a student is ac­cepted into a class, then the day, time, and room are shown next to the course number. Student fees and total tuition are computed and shown on the report. Student fee data is interfaced to the accounts receivable subsystem. When registration is complete, course enrollment reports are prepared for the instructors.


a., Prepare a document flowchart for this process..

Cash Receipt

Ashton Fleming has asked you to document the cash receipts system at S&S. Ashton’s narrative of the system follows:

Customer payments include cash received at the time of purchase and payments received in the mail. At day’s end, the treasurer endorses all checks and prepares a deposit slip for the checks and the cash. A clerk deposits the checks, cash, and deposit slip at the local bank each day.

When checks are received as payment for accounts due, a remittance slip is included with the payment. The Treasurer sends this to accounts receivable. The remittance slips are used to update the accounts receivable file at the end of the day. The remittance slips are stored in a file drawer by date.

Every week, accounts receivable generates a cash receipts report and an aged trial balance using the accounts receivable ledger. The cash receipts report is sent to Scott and Susan and one of them reviews it. A copy of the aged trial balance is sent to the credit and collections department where it is reviewed.


Prepare a document flowchart for the cash receipts system at S&S.

Beccan Company (Centralized Purchases and Inventory)

Beccan Company is a discount tire dealer oper­ating 25 retail stores in the metropolitan area. Beccan sells both private-brand and name-brand tires. The company operates a centralized purchasing and warehousing facility and employs a perpetual inven­tory system. All purchases of tires and related sup­plies are placed through the company’s central Purchasing Department to take advantage of quan­tity discounts. The tires and supplies are received at the central warehouse and distributed to the retail stores as needed. The perpetual inventory system at the central facility maintains current inventory records, designated reorder points, and optimum order quantities for each type and size of tire and other related supplies. Beccan uses five documents in its inventory control system.

Retail stores requisition.    The retail stores submit this document to the central warehouse whenever they need tires or supplies. The shipping clerks in the Warehouse Department fill the orders from inven­tory and authorize delivery to the stores.

Purchase requisition. The inventory control clerk in the inventory Control Department prepares this document when the quantity on hand for an item falls below the designated reorder point. It is then forwarded to the Purchasing Department.

Purchase order. The Purchasing Department prepares this document when items need to be ordered. It is then submitted to an authorized vendor.

Receiving report. The Warehouse Department prepares this document when ordered items are received from vendors. The receiving clerk completes the document by indicating the vendor’s name and the date and quantity of the shipment received.

Invoice. An invoice is received from vendors, specifying the amounts owed by Beccan.

The following departments are involved in Bec­can’s inventory control system:

Inventory Control Department.   Responsible for the maintenance of all perpetual inventory records for all stock items. This inventory includes current quantity on hand, reorder point, optimum order quantity, and quantity on order for each item carried.

Warehouse Department.     Maintains the physical inventory of all items carried in stock. All orders from vendors are received (receiving clerk) and all distributions to retail stores are filled (shipping clerks) in this department.

Purchasing Department. Places all orders for items needed by the company.

Accounts Payable Department. Maintains all open accounts with vendors and other creditors, in addition to processing payments.


Prepare a document flowchart that indicates the interaction and use of these documents among all departments at the central facility of Beccan Com­pany. It should provide adequate internal control over the receipt, issuance, replenishment, and pay­ment of tires and supplies. You may assume that there are a sufficient number of document copies to ensure that the perpetual inventory system has the necessary basic internal controls.

(CMA Examination, adapted)

Payroll (No-Wear)


As the internal auditor for No-Wear Products of Hibbing, Minnesota, you have been asked by your supervisor to document the company’s current payroll processing system. Based on your documentation, No-Wear hopes to develop a plan for revising the current information system to eliminate unnecessary delays in the processing of paychecks. Your best explanation of the system came from an interview with the head payroll clerk:

The payroll processing system at No-Wear products is fairly simple. Time data are recorded in each department using time cards and clocks. It is annoying, however, when people forget to punch out at night and we have to record their time information by hand. At the end of the period our payroll clerks enter the time card data into payroll file for processing. Our clerks are pretty good-though I’ve had to make my share of corrections when they mess up the data entry.

Before the payroll file is processed for the current period, human resources sends us data on personal changes, such as increases in pay rates and new employees. Our clerks enter this information into the payroll file so it is available for processing. Usually, when mistakes get back to us, it’s because human resources is recording the wrong pay rate or an employee has left and they forget to remove the record.

The data are then processed and individual employee paychecks are generated. Several important reports are also generated for management though I don’t know exactly what they do with them. In addition, the government requires regular federal and state withholding reports for tax purposes. Currently, the system generates these reports automatically, which is nice.


  1. Prepare a Document Flowchart  for the current payroll processing system at No-Wear Products.


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Insurance Claims (Angic Insurance)

Prepare a document flowchart to reflect how ANGIC insurance company processes its casualty claims. The process begins when the claims department receives a notice of loss from a claimant. Claims prepares and sends the claimant four copies of a proof-of-loss form on which the claimant must detail the cause, amount, and other aspects of the loss. Claims also initiates a record of the claim, which is sent with the notice of loss to Data Processing, where it is filed by claim number.

The claimant must fill out the Proof-of-Loss forms with the assistance of an adjuster, who must concur with the claimant on the estimated amount of loss. The claimant and adjuster each keep one copy of the proof-of-loss form. The claimant sends the two remaining copies to the claims Department. Separately, the adjuster submits a report to the Claims Department confirming the estimates on the claimant’s proof-of-loss form.

The Claims Department authorizes a payment to the claimant, forward a copy of the proof-of-loss form to Data Processing, and files the original proof-of-loss form and the adjuster’s report alphabetically. The Data Processing Department prepares payment checks and mails them to the customers, files the proof-of-loss form with the claim record and prepares a list of disbursements, which it transmits to the Accounting Department.