ASSIGNMENT PART $1$: Examining the process and then respond to the following.

$1.$ What could go wrong with RED$$s current expenditure process? Risks may be intentional $($fraud$)$ or unintentional $($mistake$).$ Identify $2$ risks.

$2.$ For each risk identified in #$1,$ suggest a manual control procedure $($not automated$)$ that could address the risk.

$3.$ For each risk identified in #$1,$ suggest an automated control procedure that could address the risk.

ASSIGNMENT PART $2$: Flowcharting

$4.$ Identify $3$ errors on this flowchart. $($Do not include lines moving in the wrong direction.$)$ Describe the error in one sentence.

$5.$ For each error identified in #$4,$ briefly suggest how it should be corrected.

RED Company is a national leader in the manufacturing and selling of electronic devices. RED has four large manufacturing facilities across the United States,

which services all the major electronic retailers. These facilities are located in the following cities: $1)$ San Jose, California $2)$ Atlanta, Georgia $3)$ Indianapolis, Indiana

and $4)$ New York, New York. In addition to the manufacturing facility, RED is headquartered and has its executive and administrative offices in Indianapolis.

Headquarters is the centralized function of the entire company. Several of the departments included at headquarters are Financial Reporting, Revenue $($Sales$),$

Expenditures $($Purchasing & Accounts Payable$),$ Payroll and Fixed Assets.

RED$$s Expenditure Process:

$$ RED does not warehouse any inventory. All needs are handled through the purchasing process.

$$ All staff can create a purchase requisition, but it must be approved by the staff's manager. If the requestor is a manager, no approval is necessary.

$$ Once the purchase requisition is approved, a purchasing clerk creates the purchase order, if the vendor already exists in the system.

$$ If the vendor does not exist in the system, the purchasing clerk is responsible for creating the vendor in the system; however, the General Manager has access to

create vendors in case the purchasing clerk is out of the office.

$$ Once the purchase order is created, it is sent to the vendor.

$$ Once materials are received from the vendor, receiving creates a receiving report from the packing slip and goods received and sends the packing slip and

receiving report to accounts payable.

$$ Accounts payable will also receive an invoice from the vendor.

$$ If the invoice is over $$50,000,$ the accounts payable clerk performs a $3-$way match of invoice, receiving report, and original purchase order.

$$ The cash disbursement voucher is then prepared and sent to the voucher register. An automated process searches the voucher register for checks to be created,

creates the checks, and records them in the check register.

$$ The checks are then signed and sent to the vendor.