Donnen Designs, Inc. is a small manufacturer of women’s casual-wear jewelry, including bracelets, necklaces, earrings, and other moderately priced accessory items. Most of their products are made from silver, various low-cost stones, beads, and other decorative jewelry pieces. Donnen Designs is not involved in the manufacturing of high-end jewelry items, such as those made of gold and semiprecious or precious stones.
Personnel responsible for purchasing raw material jewelry items for Donnen Designs would like to place orders directly with suppliers who offer their products for sale through Internet Web sites. Most suppliers provide pictures of all jewelry components on their Web sites, along with pricing and other sales-term information. Customers who have valid business licenses are able to purchase the products at wholesale, rather than retail prices. Customers can place orders online and pay for those goods immediately by using a valid credit card. Purchases made by credit card are shipped by the suppliers after the credit approval is received from the credit card agency, which usually occurs the same day. Customers can also place orders online with payment being later made by check. However, in that event, purchases are not shipped until the check is received and cashed by the supplier. Some of the suppliers allow a 30-day full-payment refund policy, whereas other suppliers accept returns but only grant credit toward future purchases from that supplier.

Required
a. Identify advantages for Donnen Designs if management allows purchasing personnel to order goods online through supplier Web sites.
b. Identify potential risks associated with Donnen Designs’ purchase of jewelry pieces through supplier Internet Web sites.
c. Describe advantages of allowing purchasing agents to purchase products online using a Donnen Designs credit card.
d. Describe advantages of allowing purchasing agents to purchase products online with payment made only by check.
e. What internal controls can be implemented to ensure that
(1) Purchasing agents do not use Donnen credit cards to purchase nonjewelry items for their own purposes, if Donnen allows purchasing agents to purchase jewelry using Donnen credit cards?
(2) Purchasing agents do not order jewelry items from the suppliers and ship those items to addresses other than Donnen addresses?
(3) Donnen does not end up with unused credits with jewelry suppliers as a result of returning unacceptable jewelry items to suppliers who only grant credit toward future purchases?