Instructions: The Narrative Below Which Represents The Pro

Instructionssee The Narrative Below Which Represents The Process And

Instructions: See the narrative below which represents the process and controls of Leopards, Inc. Please perform the following: 1) Prepare a flowchart for the Purchasing and Disbursements cycle. Use your Warren Sports reference materials for the manual symbols and also see below for additional symbols that may best represent the ‘system’ or electronic aspects of the flowchart (such as database files, input devices and information flow). If you want to use your own symbols, please use a key to show me what you are depicting. 2) On your flowchart, identify the key “what can go wrong” risks relative to errors and fraud in financial reporting. Create a tickmark to place in the area of the flowchart where the risk would occur and explain it in a tickmark legend. You don’t need to identify every risk, just the major or key risks. 3) In a different worksheet of your spreadsheet, create a matrix that maps the process to the risk (what can go wrong) to the desired control and document whether the control exists and is effective. Don’t forget to analyze segregation of duties as well.

Paper For Above instruction

The process of procurement and disbursements is crucial to ensuring the accuracy, completeness, and integrity of a company's financial reporting. In the case of Leopards, Inc., understanding the detailed flow of these processes, identifying potential risks, and implementing effective controls are vital for minimizing errors and preventing fraud. This paper outlines a comprehensive approach to designing a flowchart of the purchasing and disbursements cycle, detecting key risks, and evaluating controls, including segregation of duties, to uphold financial integrity.

Developing the Purchasing and Disbursements Flowchart

The initial step involves mapping each activity within the purchasing and disbursements cycle. This includes identifying the source documents, processing steps, decision points, data storage, and the flow of information between entities involved. Using standard manual symbols, such as rectangles for processes, diamonds for decision points, and ovals for starting and ending points, combined with specialized symbols to represent system elements like database files (represented by open rectangles with a curved bottom), input devices (parallelograms), and data flows (arrows or lines), provides a comprehensive visual representation.

The process begins with the requisition of goods, where a department requests items. This request triggers the purchasing process, typically involving the approval of the requisition, which is then sent to the purchasing department. Once approved, a purchase order is generated and sent to the vendor. Upon receipt of goods, a receiving report is prepared. The vendor invoice is matched with the purchase order and receiving report—this is the three-way match—before a disbursement is processed, typically via check or electronic transfer. The disbursement transaction is recorded in the accounting system, and the payment is executed, completing the cycle.

Identifying Risks ("What Can Go Wrong")

Throughout these steps, various risks can compromise the financial reporting process. The major risks include:

• Unauthorized procurement or disbursements, leading to fraud or misappropriation of assets.
• Fictitious vendors or suppliers introduced into the system, facilitating fraudulent disbursements.
• Manipulation of the receiving report or invoice to conceal improper payments.
• Unrecorded or unapproved transactions, affecting accuracy.

In the flowchart, tickmarks can be placed in areas such as the vendor invoice matching process, approval of purchase orders, and disbursement execution to indicate where these risks are most prevalent. For example, a tickmark near the invoice processing step signals the risk of duplicate or inflated payments.

Controls and Their Effectiveness

In the second worksheet of the spreadsheet, a control matrix is created to map each process step to potential risks. It assesses whether adequate controls exist, such as segregation of duties, authorization requirements, access controls, and automation features. For example, segregation of duties requires that different individuals authorize, record, and review transactions to prevent fraud. Controls such as restricted access to vendor master files, automatic duplicate payment detection, and independent reconciliation are evaluated for effectiveness.

The segregation of duties analysis confirms whether roles are appropriately separated to prevent collusion. For instance, the employee who prepares the purchase order should not be the same individual who approves the invoice or disburses payments. If controls are lacking or ineffective, the company should implement additional measures like automated alerts, periodic audits, and stricter access controls.

Conclusion

Mapping the purchasing and disbursements process, identifying critical risks, and implementing robust controls are essential steps in safeguarding the financial reporting integrity of Leopards, Inc. A comprehensive flowchart combined with a risk-control matrix provides valuable insights into potential vulnerabilities and operational weaknesses. Regular review and enhancement of controls, especially segregation of duties, are necessary to adapt to evolving threats and operational changes, thereby ensuring accurate, reliable financial disclosures.

References

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