Case 2 Business Processes and Internal Controls Omega Sports Supply, LLC is a medium-sized, private wholesaler that purchases sports equipment from various manufacturers and distributes to retailers in the Midwest. Christina Ruiz, VP of Operations at Omega Sports (and friend of yours), has asked you to analyze the business processes associated with the companys revenue and expenditure cycles with a particular emphasis on internal controls. She has provided you with various diagrams for your review (pages 3- 6). Briefly scan over this information and then respond to the following prompts. 1. Recall that Omega Sports is a private company. What are the implications of this status as it relates to the companys legal responsibility to account for the effectiveness of its system of its internal controls? Revenue Cycle Christina expresses to you that one issue Omega Sports is currently facing relates to the billing function which is handled manually by a mistake-prone employee. A growing number of frustrated customers are reporting invoice errors. For example, one shipment of tennis rackets priced at $1,200 was listed on the customer invoice at $120,000. In another instance, a customer ordered and (correctly) received a shipment of low-end golf clubs but was billed (incorrectly) for a much more expensive, premium brand. Christina doesnt want to fire the employee but realizes that failing to resolve this issue could lead to a loss of customers. 2. What data entry/input controls could you recommend that specifically address either of these billing errors? 3. Review the Data Flow Diagram of revenue cycle activities (Figure 1), noting any violations of best practices. Expenditure Cycle Christina further expresses that she is worried about the threat of kickbacks in the procurement process. While she is unaware of any issues currently, she remembers horror stories from college where unethical purchasing agents accepted gifts from suppliers who were able to dramatically increase their prices. Christina asks for your advice on how to prevent or detect such behavior. 4. Familiarize yourself with the BPMN diagram of expenditure activities (Figure 2), noting any diagramming errors.

Page | 2 5. In your own words, describe some of the limitations of internal control systems.