- orders are received by the sales office through the mail from customers. Asales order form is immediately prepared in duplicate for each customer order which are preprinted and kept in the sales office but are not serially numbered. Copy NO.2 is retained on file together with the customer order.
- Copy NO.1 is sent to the credit department for authorization & approval. The credit manager checks the order against the approved customers’ list & the current accounts receivables subsidary ledger account balance. THe approved sales order is sent to the storekeeper, who checks whether the goods are available in stock to meet the request
- If they are available a multicopy sales invoice is prepared. Like the sales order forms, the sales invoices are preprinted but are not serially numbered. 1copy is sent to the customer. 2nd to the accounts department. 3rd is send to the customer with the goods as a packing slip. 4th is filed together with the customer order by the storekeeper.
Q1.Identify and briefly describe the weaknesses in internal control over the existing sales ordering system.
Q.2 Recommend improvements for the weaknesses identified
Al Mac Wheel
1 year ago
Your flow chart is incomplete.
* do what if new customer
* suppose customer tries to place order by some method other than the snail mail
* if credit not approved, who all notified why, such as the customer
* do what if not in stock
* should sales order have copy # 3 immediately back to customer as an acknowlegement of the order, with what our pricing is, so customer can see that it got entered correctly
There are opportunities for embezzlement
* Customer sends money with order, which disappears in the sales office & no one knows who took the money
* Value of order gets inflated so customer gets over-billed, and someone pockets the excess money, where the invoice copies are not really identical
Failure to have control #s on the various documents along the way means that an inordinate amount of time and energy is expended when
* customer calls to ask about status of sales order
* customer calls to claim they got the invoice but not the product, so you have to trace the product
* paperwork is piling up waiting on the inventory to arrive … when multiple customers have ordered same stuff, how do you prioritize who gets it, when it does arrive & not enough for all the orders … so much simpler if the sales orders have data AND some kind of serial #, such as TIME (in addition to date) taken to excess decimal places (fractions of a second)
In any modern busines there is a computer system.
Various control #s ride along with records
cust #, product coding, delivery address might not be same as billing address, code for credit dept approval or whatever, date of shipment
The computer system often comes with its own internal controls, and may have some flaws relative to your business
Even with computer system, there are control issues.
e.g. human being enters customer order into the computer … the computer issues an order #, which the human being transcribes onto the original paperwork … people downstream gets lists of needs, which they update Ok not, whatever … but we have had people who make an error in the original customer order, such that the input gets cancelled, and the person doing the data entry not realize it, then a month later customer calls "where is my order, when will I get it?" customer service looks up original paperwork, can’t find order in the system, comes crying to computer dept asking "Who is deleting my orders?" and they don’t want to accept answer that they never entered it properly in first place.