evaluate the sales system of Rose Ltd drawing on FIVE deficiencies in the system and theimplicationsof those deficiencies.

Rose Ltd is a major distributor of plants and garden supplies, supplying a number of garden centres around the UK. The company also has a number of their own garden centres open to the general public. You are about to commence the audit for the financial year ended 31 July 2021 and have been assigned to audit sales and receivables.

Cash Sales

The garden centres operate electronic cash tills and customers pay by cash, debit or credit card. Each garden centre has one log in code to access all the tills and this is changed every 4 weeks. On a daily basis the last operator on each till independently empties their till and takes the takings to the garden centre manager. The manager counts the daily takings of all tills together and agrees this to the cash sales total for the day on the system. He then completes the online daily sales total report including both cash and card sales, which is submitted to the head office on a daily basis. Cash takings are collected by an external collection company every 10 days and transported to the bank. Cash is stored in a safe at each garden centre until collection and the safe is accessible via a key that is stored in a drawer of a locked cabinet in the manager's office.

Credit sales

The credit sales system is an online system that allows customers to raise orders online using their unique customer account number, which will then be accepted by a sales team at the head office. The system is not linked to the inventory system, so the sales team will need to manually check stock levels on a different system before accepting the order. It is common for orders to be accepted for goods not in stock especially during busy periods and when the sales team wants to meet their monthly targets. New customers will need to apply to the sales team who will conduct a credit check and set the appropriate credit limit. Any member of the sales team can create a new customer account and set the credit limit. Once an order is accepted, the sales team will forward on the order (with the customer account and date as reference) via email to the despatch department for delivery to the customer. The despatch department raises a goods despatch note on the system and prints a copy to send with the goods to the customer. On a daily basis, the warehouse manager prepares a list of all despatches for the day to email to the accounts department for invoicing. Last year, a warehouse manager, who is no longer employed, had colluded with a member of the sales team to raise and despatch orders to a fictitious customer. The sales individual created a fictitious customer account and orders before forwarding to the warehouse manager who will despatch the goods to a known address and then not include that despatch in the daily list sent to the accounts department for invoicing.

Trade Receivables

The receivable days has increased from 45 days to 65 days this year. Credit customers are usually given 60 days to pay for an invoice.