A trading company adopts a real time inventory management system, which updates the inventory record immediately for goods in and out. The warehouse adopts security control which means only authorized staff can access the warehouse. To track its inventory, the company puts radio frequency identification tags on every inventory item inside its warehouse. Detectors of radio frequency are also placed inside the warehouse. The warehouse staff pick and pack the ordered goods every day and transfer them to shipping department for delivery. The company uses an enterprise resource planning system which is configured to prevent duplicate shipments. A packing slip and an invoice are prepared and sent to the customer together with the goods. To ensure the company has sufficient inventory to meet its sales demand, the sales and inventory control personnel review the sales forecast and activity reports regularly.

When the receiving personnel of the trading company receive goods from suppliers, they will examine the names and quantities of the goods on the purchase order to ensure those goods are ordered before they do the counting. After they finish the counting, they will prepare and sign the receiving report. Then, they will transfer those goods to the warehouse. Both the receiving and warehouse personnel will sign a dated report which states the names and quantities of the goods transferred. The company will conduct inventory count every two years to verify the accuracy of the inventory records.

On one morning, a warehouse staff prints out a picking ticket and based on the quantity indicated on the ticket, he tries to pick 20 units of inventory C764 from the warehouse shelves. However, he can only find 18 units from the shelves. In the afternoon, the warehouse staff conduct a thorough search and conclude that the warehouse only stores 18 units of C764.

a Identify the current problem that the company is facing. (Word limit: 10 words()2 marks)

b Identify two control weaknesses or mistakes that the case hinted. (Word limit: 30 words) (5 marks)

c Identify a missing control procedure for preventing the problem in part a. (Word limit: 15words) (3 marks)