Analyze the current system and identify specific internal control problems.

The customer sales order is received via phone or through the mail. Gus Grinwich, the sales clerk, receives the sales order and checks the customers credit record. Once Grinwich checks the customers credit record, he prepares the sales order. From this sales order, Grinwich prepares a customer copy, stock release, shipping notice, two copies of the invoice, ledger copy, packing slip, and the file copy. One of the invoice copies, the ledger copy, and the file copy go to the billing department. The other copy of the invoice and the shipping notice are sent to the shipping department. The stock release and the file copy are sent to the warehouse department.

In the warehouse department, Steve Rossini, the warehouse clerk, receives the stock release and Phil Denuto, the stocker, checks the shelves to pick the gloves for the sales order. Once the goods are taken off the shelf in the warehouse, the stock release is sent to the billing department. Sparky Littleton, the billing clerk, reconciles the invoice, ledger copy, and stock release to make sure that the amount of inventory taken from the shelves is the same as the amount listed in the invoice. Littleton bills the customer for the goods released from the warehouse department. Littleton prepares the sales journal and makes the journal voucher. The journal voucher is sent to the general ledger department. The stock release is sent to the inventory control. The invoice is then filed in the billing departments file and the ledger copy is sent to the general ledger department.

The shipping department receives the invoice and the shipping notice. They send the goods to the carrier along with the invoice, the packing slip, and the two copies of the bill of lading. The invoice states the amount and quantity of goods that the customer requested in the sales order form. The shipping department files the shipping notice from the customers order.

Inventory control receives the stock release form from the billing department. With the stock release form, Bobby Higgins, the inventory clerk, updates the inventory subsidiary ledger relating to the goods that have been released from the warehouse. The ledger copy arrives at the general ledger department from the billing department. Dave Fielder, the general ledger clerk, uses the ledger copy to update the accounts receivable subsidiary ledger. Periodically, Fielder prepares the accounts receivable summary and reconciles it with the journal voucher from the inventory subsidiary ledger and the journal voucher produced by the sales journal in the billing department in order to update the general ledger. These three forms are then filed by Fielder.