Question

Explain the possible problems associated with receiving goods and appropriate
actions in response to the problems.

[10 marks]
b) Discuss how Accounting Information System (AIS) can add value to the organization.

Answer 1

I Friend,

Please refer to the solution below.

(A) Problems in receiving goods:

• Goods orderred may not be delivered in exact quantity and specification
• Goods can be damaged in transit or deterioriated in transporting
• Goods may not be propertly inspecting to be used by the supplier
• Proper documentation not issued then goods receievd from Supplier
• Unloading and deposit of goods to the warehouse may not be properly regulated due to this theft, loss or damage can be happended with goods.

A receiving procedure is needed to properly inspect all incoming goods, mark them with tags, and record them as having been received.

Inspect Incoming Goods (Receiving Staff)

1. Upon receipt of a delivery, match the received items to the description stated on the accompanying bill of lading, as well as the description on the related purchase order. Major discrepancies can lead to rejection of the delivered goods.
2. If there is no authorizing purchase order and the purchasing manager does not issue a waiver, reject the delivered goods.
3. Use a preprinted receiving checklist to inspect each delivery. Items likely requiring review are the quantity received, comparison to a quality threshold, and the date and time of receipt. Note any variances on the checklist. Initial the checklist when the review is complete.
4. Sign a photocopy of the bill of lading to indicate that the delivery has been inspected and is accepted.

Identify and Tag All Received Inventory (Receiving Staff)

1. Identify each item in a delivery and ensure that it is properly labeled with a bar coded tag that includes the item number, quantity, and unit of measure. If there is some uncertainty regarding which item number to use, consult with the senior warehouse staff or purchasing department.

Log in Received Items (Receiving Staff)

1. Update the receiving log with the date and time of receipt of each delivery, as well as the name of the shipper, supplier, purchase order number, and description of goods received.
2. Send a copy of the signed bill of lading to the billing clerk in the accounting department.
3. File the master copy of the billing of lading by date in the warehouse filing area.

Note: If a delivery arrives when a physical inventory count is being conducted, segregate the goods in a clearly marked storage area, and do not record these items in the inventory database until after the physical counting process is complete.

(B) AIS- An accounting information system (AIS) is a structure that a business uses to collect, store, manage, process, retrieve, and report its financial data so it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors, regulators, and tax agencies.

In the following ways it can add value to the organisation:

• An accounting information system (AIS) is used by companies to collect, store, manage, process, retrieve, and report financial data.
• AIS can be used by accountants, consultants, business analysts, managers, chief financial officers, auditors, and regulators.
• An AIS helps the different departments within a company work together.
• An effective AIS uses hardware and software to effectively store and retrieve data.
• The internal and external controls of an AIS are critical to protecting a company's sensitive data.

• Real World Examples of Accounting Information Systems

  A well-designed AIS allows a business to run smoothly on a day-to-day basis while a poorly designed AIS can hinder its operation. The third use for an AIS is that, when a business is in trouble, the data in its AIS can be used to uncover the story of what went wrong. The cases of WorldCom and Lehman Brothers provide two examples.

  WorldCom

  In 2002, WorldCom's internal auditors Eugene Morse and Cynthia Cooper used the company's AIS to uncover nearly $4 billion in fraudulent expense allocations and other accounting entries.10 Their investigation led to the termination of CFO Scott Sullivan, as well as new legislation—section 404 of the Sarbanes-Oxley Act, which regulates companies' internal financial controls and procedures.11 12

  Lehman Brothers

  When investigating the causes of Lehman's collapse, a review of its AIS and other data systems was a key component, along with document collection and review, plus witness interviews. The search for the causes of the company's failure "required an extensive investigation and review of Lehman's operating, trading, valuation, financial, accounting, and other data systems," according to the 2,200-page, nine-volume examiner's report.13

  Lehman's systems provide an example of how an AIS should not be structured. Examiner Anton R. Valukas' report states, "At the time of its bankruptcy filing, Lehman maintained a patchwork of over 2,600 software systems and applications... Many of Lehman's systems were arcane, outdated or non-standard."13