PBL SESSION 1: REVENUE CYCLE

Salman has a store in Kuala Lumpur. Customers come into the store and browse the catalog
of products. Once they have located the product they would like to purchase, they can take
the unique identification number each product has and enter it into the inventory devices on
the shop floor. By entering the number, the system will be able to show the customer the
details of the product, whether it required home delivery and how many are left in stock.

If the customer wants to purchase the product, they fill in a slip of paper with the
identification code and the desired quantity and queue for the check- out and give it to the
sales assistant.

At the check-out, the sales assistant will take the slip and input the identification number
into the system via their keyboard. If it shows that there are still some of the product in
stock, the customer will be asked for payment (cash, laser or credit card). Once the
transaction is complete it is saved to the transaction file and the customer will be given a
receipt which also shows what counter they should collect the product at and an
approximation of how long they will be waiting.

In the stock room as transactions occur, a stock room clerk are notified of the product and
quantity and will search the stock room and bring the product to the counter for collection.
They will input into the system that the order has been filled and that the customer can
collect it (the product catalog will be amended for stock level); the overhead screen will
indicate to the customer that they may collect their order and at which counter.

The customer may then pick up the product and leave the store. Periodically, as products are
purchased the stock will run out (stock levels will be checked) and will have to be reordered
from the supplier. Stock room clerk uses a wide number of suppliers so they keep a list of
their contact details and the products they supply. Stock room clerk records all details
relating to orders in the product- order file, this can be used to verify incoming orders later.
The supplier receives a batch order for products periodically which they will fill and notify
the stock room clerk of the delivery time and cost.

Required:

a. Prepare Data Flow Diagram for the process above

(15 marks)

b. Quick and easy, ewallet is one of the best 21st century invention that allows people
to make payment in single click. However under certain circumtances, the users
might have difficulties in using the application in Malaysia. Discuss.

(15 marks)
(TOTAL: 30 MARKS)
PBL SESSION 2: EXPENDITURE CYCLE

Alvin, Inc. has hired you to review its internal controls for the purchase, receipt, storage, and
issuance of raw materials. You observed the following:
• Raw materials, which consist mainly of high-cost electronic components, are kept in a
locked storeroom. Storeroom personnel include a supervisor and four clerks. All are well
trained, competent, and adequately bonded. Raw materials are removed from the
storeroom only upon written or oral authorization by a production supervisor.
• No perpetual inventory records are kept; hence, the storeroom clerks do not keep
records for goods received or issued. To compensate, the storeroom clerks perform a
physical inventory count each month.
• After the physical count, the storeroom supervisor matches the quantities on hand
against a predetermined reorder level. If the count is below the reorder level, the
supervisor enters the part number on a materials requisition list that is sent to the
accounts payable clerk. The accounts payable clerk prepares a purchase order for each
item on the list and mails it to the supplier from whom the part was last purchased.
• The storeroom clerks receive the ordered materials upon their arrival. The clerks count
all items and verify that the counts agree with the quantities on the bill of lading. The bill
of lading is then initialed, dated, and filed in the storeroom to serve as a receiving
report.

Required:

a. Describe five (5) weaknesses that exist in Alvin’s expenditure cycle and make
suggestions for improvements using a two column approach.
(15 marks)
b. Describe how IT development can be integrated in these control procedures
(5 marks)
c. Describe these documents.
i. Purchase order
ii. Receiving report
iii. Sales Invoice
iv. Packing slip
v. Picking ticket
vi. Bill of lading
vii. Credit memo
viii. Remittance advice
ix. Cashflow budget
x. Back order

(10 marks)
(TOTAL: 30 MARKS)

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PBL SESSION 3: PAYROLL CYCLE

Buddy Sdn Bhd is a manufacturer of audio equipments based in Kulim Hi-Tech Park, Kedah. It
currently employs 200 employees who worked in various departments. The payroll system
of Bujang Valley Sdn Bhd is described below.

The employees manually recorded their hours worked on timesheets. Every Friday, the
supervisors of their departments collect the timesheets, review and approve them before
forwarding these timesheets to the payroll department.

During payroll processing, the individual employee wage rates are manually pulled from the
personnel file based on the employee identification number. The payroll clerk manually
prepares checks for each employee’s approved timesheet.

The payroll clerk then updates the payroll register and sends a copy of the payroll register to
the accounts payable clerk who updates the accounts payable ledger. After that, the payroll
clerk sends a payroll summary to the general ledger and forwards all paychecks to the cash
disbursement department.

The cash disbursement clerk signs the paychecks and forwarded them to the supervisors of
the respective departments. The supervisors then distribute the paychecks to each
employee under their supervision.

The cash disbursement clerk returned the signed copies of the payroll checks to the payroll
department and the payroll clerk matched them against the payroll register before they are
filed in the department.

Later, the cash disbursement clerk prepares a list of the verified payroll checks recipients
and forwards a copy to the accounts payable department and another copy to the general
ledger clerk. The accounts payable clerk uses the verified list to update the accounts payable
ledger, while the general ledger clerk uses the list to reconcile against the summary report
and posts to general ledger.

a. Required:
Discuss five (5) internal control weaknesses that exist in the payroll system of the
company and suggest the improvement that can be implemented. Your answer should
be written using the following format:

Weaknesses Improvements

(15 marks)

b. Capturing and maintaining accurate time and attendance data of employee in this
dynamic environment is quite a challenge nowadays. Discuss the benefits of cloud
based payroll for business.
(10 marks)
b. Explain briefly any two (2) possible risks that associated with non-cloud based payroll
system transaction.

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 (5 marks)
(TOTAL: 30 MARKS)
PBL SESSION 4: PRODUCTION CYCLE

AKA Bhd (AB) is a medium sized manufacturer of automobile’s body kits with an average
annual turnover of RM730, 000. Located in Seberang Perai Industrial Park, Penang, its fiber
range of products include standard and sporty front and rear bumpers for Proton cars, rear
and mid spoiler for Perodua and several other sporty and stylish side skirting for both Proton
and Perodua personal vehicles.

AB has developed quite an outstanding goodwill among its 150 customer, majority are car
dealers, wholesalers and automobile accessories outlets. However, none of them could be
considered as major customers. Thus, AFAB chooses to gear its production based on sales
forecast derived from a loosely projected demand.

AB’s production activities are described below:-

Production Scheduling

Harry, AB’s production engineer, who is also responsible to control the work area, prepares
a production schedule for each production batch. Harry is also required to check the
inventory level through the terminal available at the storeroom before each production
batch is put into motion.

If he finds that the inventory is insufficient, he will personally contact any authorized
supplier as listed in the recommended supplier file. The supplier will send the materials
together with the invoice directly to the storeroom.

At the inventory storeroom, Harry signs the delivery note to indicate receipt of the materials
from the supplier and hands over the invoice to the accounts department for clearance. No
other checks are made, as long as the supplier is one of those in the recommended supplier
file.

Work Centres

In the work centres, Harry prepares a work order sheet detailing the exact materials used
and processes for each production batch. These details are keyed into the computer system
using the terminal at the factory floor. He prints and then passes the document to Kamal
who is AFAB’s production supervisor. Harry also prepares a material requisition note
authorizing the inventory storeroom to release raw materials for use in the production
process. Kamal then prepares a move ticket recording work done in each work centre. He
sends it to Harry for authorization before the batch could be relayed to another section.

Once all work are done, a completed job ticket is issued by Kamal who transmits it directly
via the computer system to the cost accounting section of the accounts department. The
accounting department makes no other check or reviewed. Each production operator then
submits his/her time card to the payroll section of the accounting department for salary and
overtime claims.

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Kamal also verbally notifies Harry once the production process is completed. Harry will then
mark his copy of the move ticket as “complete” and file it for future reference.

Each responsible person will need to number all of the documents used in the whole
production process.

Required:

a. Discuss three (3) weaknesses in AB’s present production scheduling and three (3)
weaknesses in its work centers and explain the potential risk exposures posed by
the weaknesses. Suggest relevant six (6) improvements that can be used to
address the weaknesses identified earlier. You must answer in the following
format:

Weaknesses Improvement

(18 marks)

b. Physical controls remain as the main concern in the conversion cycle, especially for
business dealing with tangible assets. The loss of its assets and product would
have a direct negative impact on a business’s profit margin and eventually will
affect the sustainability of the business itself. Discuss how big data analytic can be
used to improve production.
(12 marks)

(TOTAL: 30 MARKS)

PBL SESSION 5: GENERAL LEDGER AND REPORTING SYSTEMS

Identify corresponding controls for these threats in the general ledger and reporting system.

THREAT 1: Errors in updating the general ledger because of inaccurate/incomplete journal

entries or posting of journal entries

THREAT 2: Loss or unauthorized disclosure or alteration of financial data

THREAT 3: Loss or destruction of the general ledger

(TOTAL: 12 MARKS)

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