Question
Below is the extract of system for billing and recording accounts receivable which is in use at Kids Foundation Corporation Ltd (Kids Foundation), a wholesaler
Below is the extract of system for billing and recording accounts receivable which is in use at Kids Foundation Corporation Ltd (Kids Foundation), a wholesaler of household furniture. All sales are in credit. An incoming customer order is received in the order department by a clerk who prepares a pre-numbered company sales order form (3 copies). The sales order form contains information such as the customers name and address, customers account number, quantity and items ordered. After the sales order form has been prepared, the customers order is attached to it. One copy of the sales order is then passed to the credit department for credit approval. If credit is not approved, the sales order form will be returned to the order department and an order clerk will inform customers. If credit is approved, approval of credit is noted on the form. The approved sales order form is then passed to the shipping department where a clerk uses a computer to generate a shipping document and arrange the delivery of the goods ordered to customers. Another copy of the approved sales order is sent to the billing department where a billing clerk manually determines and enters the unit prices for the items from a list of billing prices to the computer system. This is followed by a review and approval by the sales manager to ensure the accuracy of the unit price who inserts his initial on the invoice as the evidence of his check. The accounting system automatically multiplies the number of items times the unit price and adds the extended amounts for the total amount of the invoice. A three-copy invoice that is no sequentially numbered is created and the sales transaction is recorded automatically by the accounting system based on the invoice. Required: (a) Evaluate the strength of the clients internal control over the sales and collection cycle by identifying and explaining 4 internal control activities present in the system. State 1 relevant assertion that is addressed by each of those internal controls.
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