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Business Processes

Name

Institution Affiliation

Course

Date
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Business Processes

Flow chart

Purchasing Accounts payable

Requisition Invoices
created

Check for
Requisition accuracy
approved

Accounts
Filing of payable
requisition supervisor

Placing Cash
purchase order disbursement

Prepared, Treasurer
approved and
distributed

Final Review
General ledger
clerk

Checks to mailroom

Creating purchases must be followed closely to ensure the organization does not lose some of its

purchases. In addition, the preparation for purchase must be accompanied by an accounts

payable process, which helps monitor. The northwest manufacturing company shows that the
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company has observed all the purchase procedures and accounts payable procedures. Identifying

the weaknesses in the company's purchasing process when performing internal audits is

important to ensure they are eradicated in the future. The company needs to employ

computerized applications which help in easy monitoring of the procedures and leads the

company to identify frauds during internal audits easily.

Internal control weaknesses

Internal controls are essential to maintaining a company's integrity because they guarantee

efficient and effective procedures and guidelines to help businesses avoid, identify, and correct

fraud and other financial misstatements. Any business is vulnerable to internal control

weaknesses that could lead to financial inaccuracies and noncompliance with SEC and SOX

regulations. Weaknesses in internal controls may endanger accounting information systems,

resulting in a general lack of trust in the business among customers, investors, and the general

public (Byrnes et al., 2018). Despite the fact that Northwest Manufacturing adheres to a specified

business process, it is clear that modifications may be made to strengthen the company's internal

controls, in particular, changes that could be used to eliminate the possible risks associated with

weakened controls. Some weaknesses identified by the company are a lack of segregation of

duties and responsibilities, and a lack of computerized controls.

Segregation of Duties and Responsibilities

Northwest Manufacturing employs a business procedure that does not divide tasks and

responsibilities across different processes. For instance, the clerks in the accounts payable

department receive the invoice and compare it to the purchase order, requisition form, and

receiving report to check for mathematical errors (Harp & Barnes, 2018). The clerks also make
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sure that the purchase orders and receiving reports' numerical sequences are accurate. In this

case, the risk is created due to the internal control weakness after the invoices, purchase orders,

and receiving reports are forwarded to accounts payable.

Northwest should carefully identify the responsibilities and range of work for each role before

dividing work into 5–10 subsets into market cycles based on distinct responsibilities that involve

every process, from requisition creation to reporting filings. One effective internal control that

further reduces risk is the segregation of duties, which prevents processing a document, invoice,

order, requisition, or report from being left in the hands of one clerk (Lowe et al., 2018). When

the duties are segregated, there will be no duplicating of duties by the same officers. In addition,

the company will be able to monitor every staff member and eliminate those that are not needed

in the functioning of the company.

Computerize Application Controls

As technology develops, businesses continue to employ IT systems, including accounting

information systems. Currently, Northwest Manufacturing uses hard copies of invoices and other

reports that are physically mailed to accounts payable to be verified for accuracy before being

physically filed after going via the mailroom (Byrnes et al., 2018). For example, risks could arise

from misplaced documents or alterations made to the hard copy.

It can be advantageous to use computerized application controls to reduce the hazards

involved with transferring paper documents between departments. Northwest Manufacturing can

process and retain accurate, complete, and validated business transactions while maintaining the

transactions' integrity by adopting computerized application controls. Computerized documents

can be protected under several access controls, limiting the ability of unauthorized employees to
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access the papers (Lowe et al., 2018). They also keep track of changes made and where they are

made to the original. The advent of technology has witnessed increased demand for its use in

auditing and business operations. Many businesses have shifted to acquiring technological

equipment that helps deal with messes experienced before the technology era.

Conclusion

Northwest Manufacturing adheres to a certain business process, but after evaluating it, it is clear

that some adjustments may be made to strengthen the company's internal controls and to reduce

the risks brought on by poor controls specifically. Making the suggested changes of segregating

responsibilities and computerizing programs to reduce risk brought on by weak internal controls

is crucial to the company's performance. The company assigns the same department to perform

processes and checks and to file invoices, requisitions, and final reports. The processes may be

tedious for one department and may also be a loophole for the staff to do some frauds. They are

also responsible for checking the paperwork for errors and proper numerical sequencing. The

management's responsibility is to ensure that each employee is assigned a particular duty and

plays their role perfectly. The segregation of duties ensures minimal fraud is witnessed, and the

company can conduct a performance analysis of the employees.

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References

Byrnes, P. E., Al-Awadhi, A., Gullvist, B., Brown-Liburd, H., Teeter, R., Warren, J. D., &

Vasarhelyi, M. (2018). Evolution of Auditing: From the Traditional Approach to the

Future Audit1. In Continuous auditing. Emerald Publishing Limited.

Harp, N. L., & Barnes, B. G. (2018). Internal control weaknesses and acquisition

performance. The Accounting Review, 93(1), 235-258.

Lowe, D. J., Bierstaker, J. L., Janvrin, D. J., & Jenkins, J. G. (2018). Information technology in

an audit context: Have the Big 4 lost their advantage?. Journal of information

systems, 32(1), 87-107.