Case 1 Problem Definition A large engineering firm employing 40 engineers uses two separate accounting systems. One accounting system is used to account for transactions affecting the firm; the other is used to account for all client funds. The separate systems are used to avoid commingling funds. Both systems are on a cash basis. The firm has recently standardized and centralized its billing and accounts receivable operations, and the consultant has been asked to review the billing by the office manager, the firm has experienced cash flow problems. The managing partner has requested a review of the valuation and completeness of billing and accounts receivable. Systems Analysis Description of Firm's Accounting System When billed to the client, charges are recorded as memo entries in the firm's system. Cash advances to clients are recorded in a like manner. Upon receipt of the clients' remittances of billed amounts, appropriate cash, revenue, and contract accounts are actually debited and credited. Monthly, memo entries are manually reconciled to the accounting entries by the firm's office manager. A memo subsidiary ledger of accounts receivables is then produced. 1