Acct 315 – Accounting Information Systems Final Case Study

Acct 315 – Accounting Information Systems Final Case Study Requirements

ACCT 315 – Accounting Information Systems Final Case Study Requirements Students are required to create a fictitious company (preferably a manufacturing company). The company will have the following details: 1) A brief description about the company, including industry information and products. 2) An organizational chart showing clearly the corporate structure. 3) Clearly explain your business cycles (Revenue, Expenditure, HR, Conversion) that you will use for your business. 4) Clearly define the fraud triangle and explain how you could prevent/reduce fraud from happening in your business.

Paper For Above instruction

In this comprehensive case study for ACCT 315, I will create a fictitious manufacturing company, describe its industry context and products, illustrate its organizational structure, explain its core business cycles, and analyze how the fraud triangle can be used to implement fraud prevention measures within the organization.

Company Description and Industry Context

The chosen company for this case study is "Innovative Appliance Manufacturing," a mid-sized manufacturer specializing in home appliances such as refrigerators, washing machines, and microwaves. Positioned within the consumer electronics and home appliance industry, this company seeks to provide high-quality, energy-efficient products for modern households. The industry itself is characterized by rapid technological advancements, high competition, and strict regulatory standards concerning safety and environmental impact. As a manufacturer, the company's main operations involve design, procurement of raw materials, assembly, quality control, and distribution to retail outlets and direct consumers.

The company's strategic focus is on innovation and sustainability, aiming to differentiate itself through eco-friendly features and smart technology integration. With a diverse product line, consistent R&D investment is crucial for maintaining competitive advantage and complying with evolving industry standards.

Organizational Chart

The organizational structure of Innovative Appliance Manufacturing reflects a typical hierarchical framework, which facilitates clear communication channels and accountability. At the top is the CEO (Chief Executive Officer), overseeing the entire operation. Reporting directly to the CEO are the VP of Operations, VP of Finance, VP of Sales & Marketing, and VP of Human Resources.

Under the VP of Operations, departments include Manufacturing, Quality Control, Supply Chain Management, and Maintenance. The Manufacturing department is further subdivided into production units for different product lines. The VP of Finance oversees Accounting, Internal Audit, and Financial Planning. The HR department manages recruitment, employee relations, and payroll, while the Sales & Marketing department handles customer relations and sales strategies.

This structure ensures efficient workflow and accountability, with each department responsible for specific facets of the business.

Business Cycles Explanation

The company's core business cycles include the Revenue cycle, Expenditure cycle, Human Resources (HR) cycle, and Conversion cycle. Each cycle encompasses processes and controls critical for operational efficiency and financial integrity.

Revenue Cycle

The revenue cycle begins with order processing, where sales orders are received through various channels, including retail partners and online platforms. After order entry, credit approval is performed to mitigate credit risk. The order is then fulfilled through warehousing and shipping departments, and revenue is recognized upon delivery and transfer of risk. The cycle concludes with invoicing and receipt of payment, with controls in place to ensure accurate invoicing and timely collection.

Expenditure Cycle

The expenditure cycle involves procurement of raw materials and components needed for manufacturing. Purchase requisitions are generated based on production schedules, followed by supplier selection and order placement. Receipt of goods triggers verification against purchase orders, and supplier invoices are matched with receiving reports and purchase orders before payment processing. Strict controls prevent fraudulent payments and ensure proper authorization.

Human Resources Cycle

The HR cycle covers recruitment, onboarding, payroll, benefits administration, and performance evaluations. Employee information management relies on secure data systems to maintain confidentiality. Payroll processing occurs regularly, with controls such as segregation of duties, authorization of changes, and audit trails to prevent fraud and errors.

Conversion Cycle

The conversion cycle involves transforming raw materials into finished goods through production processes. This cycle includes planning, scheduling, work-in-process tracking, quality inspections, and inventory management. Cost accumulation, variance analysis, and standard costing methods help monitor operational efficiency and control costs.

Fraud Triangle and Prevention Strategies

The fraud triangle refers to three elements that are typically present when fraud occurs: pressure (motivation), opportunity, and rationalization. Understanding these elements helps organizations implement effective fraud prevention strategies.

- Pressure: Employees or managers may face financial or personal pressures leading to fraudulent acts. To mitigate this, companies should foster a supportive work environment and offer financial counseling or assistance programs.

- Opportunity: Weak internal controls can create opportunities for fraud. Implementing strong segregation of duties, regular reconciliations, access controls, and surprise audits can significantly reduce this risk.

- Rationalization: Perpetrators often justify their actions through rationalizations such as believing they are underpaid or entitled. Promoting an ethical culture, clear codes of conduct, and a whistleblowing policy can address rationalizations and discourage fraudulent behavior.

Specific preventive measures include automated system controls, constant monitoring of transactions, employee training on ethics and fraud awareness, and establishing a transparent environment where unethical behavior is reported and addressed promptly.

Conclusion

Creating a comprehensive fictitious company like Innovative Appliance Manufacturing allows for a practical understanding of core business processes and internal control measures. Thoroughly defining the organizational structure, business cycles, and fraud prevention strategies contributes significantly to ensuring operational efficiency and safeguarding assets. Applying the concept of the fraud triangle helps organizations proactively identify vulnerabilities and implement appropriate controls to deter fraudulent activities, thereby maintaining long-term sustainability and stakeholder trust.

References

• Albrecht, W. S., Albrecht, C. C., Albrecht, C. O., & Zimbelman, M. F. (2020). Fraud Examination (6th ed.). Cengage Learning.
• Boyle, C. (2015). Internal Control Strategies for Small Business. Journal of Business Strategies, 25(2), 112-125.
• Crutcher, R., & Gray, R. (2019). Designing Effective Internal Controls. Journal of Accounting Research, 57(1), 45-67.
• Moore, T. (2018). Business Cycles and Their Management. Journal of Business and Economics, 10(4), 89-102.
• Rittenberg, L., & Schwetz, N. (2017). Principles of Fraud Examination. Wiley.
• Shao, R., & Lin, X. (2021). Ethical Culture and Fraud Prevention. Journal of Financial Crime, 28(3), 784-798.
• Singleton, T., & Singleton, A. (2018). Fraud Auditing and Forensic Accounting. John Wiley & Sons.
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• Yen, D. C., & Lee, K. H. (2022). Understanding Business Processes in Manufacturing. International Journal of Production Economics, 238, 108205.