Recently our firm was assigned the task of preparing a flowchart for possible systems that Kudler Fine Foods could use to enhance their business. After reviewing the flowchart, our client is now requesting that we provide information on controls that will be required for this system. This business brief will analyze the risks in the system, identify all risks and internal control points by displaying them in a flowchart, design internal controls to mitigate risks to the systems, evaluate the application of internal controls to the system, and discuss other controls outside of the system that our client may need.
Analyze the risks in the systems that your team analyzed. Every system that is implemented in any company “faces risks [that] come from both external and internal parts of the organization” (Bangranoff, Simkin & Strand, 2008, p. 243). The characteristics of the system that we recommended for Kudler Fine Foods does not exclude these risks. The system has a wide variety of tasks that are needed in order for it to work properly. The main risk that stands out in the outline of this system is to make sure the segregation of duties within the system are properly in place. All of the tasks within the system should be separate and assigned to different employees throughout each store. For example, the same employee that takes inventory cannot be the same employee that processes the invoices in the system for the vendors. This is an internal risk that gives the employee an opportunity to order products from a vendor for themselves and having the company pay for what they ordered. Separating this task will allow an internal audit between the employee who manages the inventory and the employee processes the invoices to pass because it will show that the risk level is low.

Identify all risks and internal control points by displaying them in a flowchart
Inventory Document
Inventory Order
Start
To show where the risks may take place, our firm has constructed an updated flowchart of the system with the controls included.

Inventory Received
Invoices Processed
Input Inventory into the system
Input Invoices into the system
Vendor Service

Management Approval

Management Approval

As one can see in the flowchart provided, segregating the duties of ordering the inventory, processing the invoices from the vendor, and receiving the inventory eliminates or significantly lowers the internal risks that can threaten the system. Management approval of the different processes also adds another control by validating that everything matches up with the items that the company originally ordered.
Design internal controls to mitigate risks to the systems “The objective of most security control features is to reduce financial risk [to the company]” (Bangranoff, Simkin & Strand, 2008, p. 273). To mitigate potential risks to the system, it is important to design a set of internal controls to make sure that the processes shown in the flowchart are being followed correctly and cannot be interrupted by an internal or external source. Aside from consistently monitoring the process flow of the system, it also important to implement separate controls of the system overall. A control that Kudler Fine Foods should incorporate into this new system is a file security control. “The purpose of file security controls is to protect computer files from either accidental or intentional abuse” (Bangranoff, Simkin & Strand, 2008, p. 273). For example, this control could create backup files of the invoices the company receives from the vendors and the order forms the company submits to the vendors. It is important to have backups for these file because they could potentially be tampered with by an employee or vendor. Another example of how the company can use this control is to only allow access to the invoices or order forms to a limited number of employees. The access will only be allowed with management approval and to fix items in the files that are material to the company.
Evaluation of the application of Internal Controls to the System The application of the internal controls to the proposed system for Kudler Fine Foods closes security gaps that could hurt the company financially. Segregating duties in the system allows enough employees to physically see what should be going into the system and what should be being paid to the vendors. This greatly reduces the threat of theft by internal or external risks. The accuracy of orders placed or payments made to vendors is also affected because more than one set of eyes can audit the processes to assure that the company is not overpaying the vendors or ordering too many of one inventory item.
Controls outside of the System One key control outside of the system that the company must emphasize is that it is the “management’s responsibility to make sure that [the] company’s accounting system is collecting, measuring, processing, and communicating financial data” (Bangranoff, Simkin & Strand, 2008, p. 244). Management must communicate to their employees what their roles and responsibilities are in the system (Bangranoff, Simkin & Strand, 2008, p. 244). Communicating with the employees also includes letting them know it is okay to bring up potential problems that management may oversee and that working as a team makes the system better. Monitoring the processes of the system and making sure that proper controls are always in place in the system is also critical for management. “Managers at various levels in the organization must evaluate the design and operation of controls and then initiate corrective action [when it is needed]” (Bangranoff, Simkin & Strand, 2008, p. 244).
Closing Statement Our firm hopes that this brief shows the importance of continually recognizing risks and implementing controls within the systems at Kudler Find Foods. It is important that the company will always oversee, evaluate, and monitor the controls of any system within their company. If Kudler Fine Foods understands the importance of maintaining the controls with their systems, the company’s financial risks will be low.

References
Bangranoff, N., Simkin, M., & Strand, C. (2008). Core concepts of accounting information systems. (10th ed.). Hoboken, NJ: John Wiley & Sons.