Question
As auditor of Da Do Enterprises Bhd, you have just completed of review of the sales ordering system and you have made the following observations:
As auditor of Da Do Enterprises Bhd, you have just completed of review of the sales ordering system and you have made the following observations:
Orders are received by the sales office through the mail from customers. A sales order form is immediately prepared in duplicate for each customer order. These sales order form are pre-printed and kept in the sales office, but are not serially numbered. Copy #2 is retained on file together with the customer order. Copy #1 is sent to the credit department for authorization and approval. The credit manager checks the order against the approved customer's list and the current accounts receivable subsidiary 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 available, a multi-copy sales invoice is prepared. Like the sales order forms, the sales invoices are also pre-printed but are not serially numbered. One copy of the sales invoice is sent to the customer. A second copy is sent to the accounts department. A third copy is sent to the customer with the goods as a packing slip. A fourth copy is filed together with the customer order by the storekeeper. The shipping clerks checks to make sure all shipments accomplished by a copy of the sales invoice.
Required:
a) Indicate weakness in internal control over the existing sales ordering system.
b) Recommend one improvement for each of the weakness identified.
c) Describe the audit tests (both tests of controls & substantive tests) the auditor may perform to determine if there are any errors or irregularities.
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