CASE STUDY

TPH Plumbing Sdn. Bhd. (TPH) start its business in 1985 as a wholesale supplier of plumbing equipment, tools, and parts to hardware stores, home-improvement centers, and professional plumbers in the northern region of Malaysia. Over the years, the company has expanded its operations to serve customers across the country and now employs over 200 people as technical representatives, buyers, warehouse workers, and sales and office staff. Most recently, TPH has experienced fierce competition from those viral companies who moving towards digitalised platform. Besides, the company is suffering from operational inefficiencies related to its archaic information system. TPHs revenue cycle procedures are described as follows: TPHs sales department consists of twenty full-time and part-time employees. They receive orders through traditional mail, e-mail, telephone, and the occasional walk-in. Because TPH is a wholesaler, the vast majority of its business is conducted on a credit basis. The process begins in the sales department, where the sales clerk enters the customers order into the centralised computer sales order system. The computer and file server is housed in TPHs small data processing department. If the customer has done business with TPH in the past, his or her data are already on file. If the customer is a first-time buyer, the clerk creates a new record in the customer file. The system then creates a record of the transaction in the open sales order file. When the order is entered, an electronic copy of the information is sent to the customers e-mail address as confirmation. A clerk in the warehouse department periodically reviews the open sales order file from a terminal and prints two copies of a stock release document for each new sale, which he uses to pick the items sold from the shelves. The warehouse clerk sends one copy of the stock release to the sales department and the second copy, along with the goods, to the shipping department. The warehouse clerk then updates the inventory subsidiary file to reflect the items and quantities shipped. Upon receipt of the stock release document, the sales clerk accesses the open sales order file from a terminal, closes the sales order, and files the stock release document in the sales department. The sales order system automatically posts these transactions to the sales, inventory control, and cost-of-goods sold accounts in the general ledger file. Upon receipt of the goods and the stock release, the shipping department clerk prepares the goods for shipment to the customer. The clerk prepares three copies of the bill of lading. Two of these go with the goods to the carrier and the third, along with the stock release document, is filed in the shipping department. The billing department clerk reviews the closed sales orders from a terminal and prepares two copies of the sales invoice. One copy is mailed to the customer and the other is filed in the billing department. The clerk then creates a new record in the account receivable subsidiary file. The sales order system automatically updates the account receivable control account in the general ledger file.

QUESTION 1. Analyse FIVE (5) internal control weaknesses in the system.

1. Dated or ineffective information systems:- Documents are the source of evidence. All the documents should be properly numbered and should be kept where they are trackable. TPH faces problem due to archaic information system.
2. No oversight and review :- It is the duty of the administration to perform basic review procedure. But sometime they get so involved in day to day operations that they neglect doing so which can be the cause of inefficiency.
3. Technical control weaknesses:- These weaknesses are related to software and hardware. These arises when the company is not able to change according to the technological changes.
4. Operational control weaknesses:- These occurs due to human errors. Since the revenue cycle procedure of the company is quite complex, there are chances of discrepancies.
5. Architectural control weaknesses:- usually, security architecture requires creating an integrated framework that highlights as well as addresses risks that arise within an organizations integrated IT environment. Weaknesses in design are harmful to the organizations security structure foundation. 2.For each of the weaknesses, explain a possible risk the company may face. (Answer this)