Following is the description of sales and cash receipts for Lady's Fashion Fair, a retail store dealing in expensive women's clothing. Sales are for cash or credit, using the store's own billing rather than credit cards.

Each sales clerk has her own sales book with pre-numbered, three-copy, multicoloured sales slips attached, but perforated. Only a central cash register is used. It is operated by the store supervisor, who has been employed for 10 years by Alice Olson, the store owner. The cash register is located at the store entrance to control theft of clothes.
Sales clerks prepare the sales invoices in triplicate. The original and the second copy are given to the cashier. The third copy is retained by the sales clerk in the sales book. When the sale is for cash, the customer pays the sales clerk, who marks all three copies 'paid' and presents the money to the cashier with the invoice copies.
All clothing is put into boxes or packages by the supervisor after comparing the clothing with the description on the invoice and the price on the sales tag. She also rechecks the clerk's calculations. Any corrections are approved by the sales clerk. The clerk changes her sales book at that time.
A credit sale is approved by the supervisor from an approved credit list after the sales clerk prepares the three-part invoice. Next, the supervisor enters the sale in her cash register as a credit or cash sale. The second copy of the invoice, which has been validated by the cash register, is given to the customer.
At the end of the day, the supervisor recaps the sales and cash and compares the totals with the cash register tape. The supervisor deposits the cash at the end of each day in the bank's lock box. The cashier's copies of the invoices are sent to the accounts receivable clerk along with a summary of the day's receipts. The bank mails the deposit slip directly to the accounts receivable clerk.
Each clerk summarises her sales each day on a daily summary form, which is used in part to calculate employees' sales commissions. Marge, the accountant, who is prohibited from handling cash, receives the supervisor's summary and the clerks' daily summary forms. Daily, she puts all sales invoice information into the firm's computer, which provides a complete printout of all input and summaries. The accounting summary includes sales by sales clerk, cash sales, credit sales and total sales. Marge compares this output with the supervisor's and sales clerks' summaries and reconciles all differences. The computer updates accounts receivable, inventory and general ledger master files. After the update procedure has been run on the computer, Marge's assistant files all sales invoices by customer number. A list of the invoice numbers in numerical sequence is included in the sales printout.
The mail is opened each morning by a secretary in the owner's office. All correspondence and complaints are given to the owner. The secretary prepares a prelist of cash receipts. He totals the list, prepares a deposit slip and deposits the cash daily. A copy of the prelist, the deposit slip and all remittances returned with the cash receipts are given to Marge. She uses this list and the remittances to record cash receipts and update accounts receivable, again by computer. She reconciles the total receipts on the prelist to the deposit slip and to her printout. At the same time, she compares the deposit slip received from the bank for cash sales with the cash receipts journal.
Marge prepares a weekly aged trial balance of accounts receivable by use of the computer. A separate listing of all unpaid bills over 60 days is also automatically prepared. These are given to Mrs Olson, who acts as her own credit collector. She also approves all charge-offs of uncollectable items and forwards the list to Marge, who writes them off.
Each month Marge prepares and mails statements to customers. Complaints and disagreements from customers are directed to Mrs Olson, who resolves them and informs Marge in writing of any writedowns or misstatements that require correction.
The computer system also automatically totals the journals and posts the totals to the general ledger. A general ledger trial balance is printed out, from which Marge prepares financial statements. Marge also prepares a monthly bank reconciliation and reconciles the general ledger to the aged accounts receivable trial balance.
Because of the importance of inventory control, Marge prints out the inventory perpetual totals monthly, on the last day of each month. Sales clerks count all inventory after store hours on the last day of each month for comparison with the perpetuals. An inventory shortages report is provided to Mrs Olson. The perpetuals are adjusted by Marge after Mrs Olson has approved the adjustments.
REQUIRED
a. For each sales transaction-related audit objective, identify one or more existing controls.
b. For each cash receipts transaction-related audit objective, identify one or more existing controls.
c. Identify deficiencies of internal control for sales and cash receipts.

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