Bradmark Wholesale General Supply

An ACL™ Case Study

Bradmark is a wholesale general supply company that ships to business customers

throughout Northeast Pennsylvania, New York state, and Southern Connecticut.
Bradmark has developed a competitive edge by offering a wide variety of quality
products at competitive prices. The company’s products range from paint to watering
cans.

Bradmark is a publicly owned company, whose board of directors has retained your firm
to conduct the annual audit. You are the in-charge auditor who is currently examining
Bradmark’s revenue and expenditures procedures and related accounts. Bradmark’s main
offices are in its Allentown, PA warehouse. The following describes your client’s system
configuration and business procedures.

System Overview and Background

Bradmark’s information system is a recently purchased application that runs on a client-
server network configuration. James Walker, a systems designer in Bradmark’s IT
department, played a central role in implementing and modifying the system to meet
Bradmark’s specific needs. Because of Walker’s familiarity with the system, he was
asked by top management to temporarily oversee the initial running of the new system to
ensure a smooth transition from the old legacy system. After several months, James
Walker was offered a promotion to Warehouse Manager and given permanent
responsibility for product purchasing.

Sales and Cash Receipts Procedures

The flowchart in Figure 1 and the record layout in Figure 2 (see the related PowerPoint
file for figures) illustrate Bradmark’s sales and cash receipts procedures.

Sales Department
Customer orders are received by mail or fax in the sales department. One of the sales
staff accesses the customer record and reviews the available credit before creating a Sales
Invoice record. For customers with insufficient available credit, the clerk submits the
order to the credit manager for approval. If granted, the credit manager verbally
authorizes the clerk to increase the customer’s line of credit accordingly. For approved
sales, a record is added to the Sales Invoice file. The system automatically assigns an
Invoice Number, which is the primary key for the record. The clerk manually enters the
remainder of the order data.

Warehouse
Based on input from the sales invoice, the warehouse terminal automatically prints a
stock release document, which the warehouse staff uses for picking the goods. The goods
are sent to the Shipping Department along with the stock release document. Once the
goods have left the warehouse, the clerk confirms to the system the quantity sold and it
automatically updates the Quantity on Hand field in the respective inventory record.
Shipping Department
The shipping department receives the goods, prepares them for shipment, selects a carrier
and prepares the packing slip and bill of lading (BOL). Once the goods are shipped, the
clerk adds a record of the shipment to the Shipping Log file.

Billing
At the end of the day the system automatically searches the Sales Invoice and Shipping
Log files for items shipped and prepares a hard copy customer invoice, which is mailed to
the customer the following morning. The current date is then placed in the Due Date field
of the Sales Invoice file.

Cash Receipts
Mary, the cash receipts clerk, receives the customer checks and remittance advises
directly from the customer. She records this transaction by entering the Invoice Number
(taken from the remittance advice) into the system. The system automatically creates a
Cash Receipts record. It assigns a Remittance Number as the primary key and adds this
number to a field in the related Sales Invoice record. The Invoice Number from the Sales
Invoice is also added to the remittance record as a reference. Mary then manually adds
the customer number, amount, and payment date to the Cash Receipts record. At the end
of the day she prepares a deposit slip and sends the checks to the bank. She files the
remittance advice in her office.

Purchasing/Payment Procedures
The flowchart in Figure 3 and the file structure diagram in Figure 4 illustrate the
purchasing/payment procedures at the central warehouse.

Warehouse
Each morning Walker reviews an automatically generated inventory status report from
his office terminal. He determines the items that need replenishing and selects suppliers
from the Vendor file. Walker then adds a record to the purchase order file. The system
assigns each new record a unique number (PO Number) as the primary key. Walker
manually enters the date, the product to be ordered, order quantity, expected unit cost (the
extended cost is automatically calculated by the system), and the ID number of the
selected vendor. The purchase orders are then printed on Walker’s terminal, signed by
him, and mailed by his secretary to the respective suppliers.

Receiving
When the products are received at the receiving dock, a receiving clerk counts and
inspects them. The clerk adds a record to the Receiving Report file from the terminal in
the receiving area. The system assigns a unique key (RR Num) to each record. The clerk
manually enters the purchase order number, product number(s), quantity received, vendor
ID number, and the date of receipt. The receiving system is not particularly user friendly.
If errors are made during data entry, the clerk must void the receiving report and begin
over with a new receiving report record. The voided record is then automatically purged
from the Receiving Report file and the system assigns the next RR Number in sequence
to the revised receiving report. As a result, sequence gaps exist in the receiving report
file indicating the missing records. The products are then sent to the warehouse where
they are secured. At the end of the work shift, the receiving clerk prints a hard copy of the
receiving report listing of the day’s receipts (including any voided receiving reports),
which is sent to James Walker’s office for his review.

Warehouse
After Mr. Walker has reviewed the receipts he manually adds the system-assigned RR
Number to the corresponding Purchase Order record to indicate that the product has been
received. The system automatically updates the Quantity on Hand field in the Inventory
file from the Quantity field in the Purchase Order record.

Accounts Payable
Sybil Johnson, the Accounts Payable clerk, receives the vendor’s invoices. Using the PO
number from the invoice as a search key, she matches the invoice with the corresponding
purchase order/payment record. She verifies that the items invoiced have been received
by observing that a RR Number has been placed in the Purchase Order record. She then
adds a record to the Voucher Payable file. The system assigns a unique key (Voucher
Number) to each record. Sybil enters manually the following data directly from the
supplier’s invoice: purchase order number, vendor number, supplier invoice number, full
amount due, discounted amount due, and due date. The due date is selected to take
advantage of purchase discounts. Finally, Sybil files the vendors invoice in her office
filing cabinet.

Cash Disbursements
Each day, Sean O’Connell in the Cash Disbursements department reviews the Voucher
Payable file for items due to be paid that day. For each item due, he adds a record to the
Check Register file. The system assigns it a unique key (Chk Number) and Sean
manually adds the following data to the Check Register record: voucher number, vendor
number, amount of payment, and date. The system automatically places the check
number in the appropriate Voucher Payable record to indicate that payment has been
made. The checks are printed in Sean’s office and then reviewed and signed by Irving
Stern, the department manager.

General Requirements

Go to the Bradmark Case Questions folder and select the appropriate questions for the
chapter you are working with--Revenue Cycle (Chapter 9), Expenditure Cycle (Chapter
10), or Fraud Issues (Chapter 12). This case requires that you install ACL™ Desktop
Edition (full educational version) that came with new copies of the textbook on your
computer. The data for the ACL portion of the case questions are located in the
Bradmark Data folder.