Hashimah Sdn Bhd is a wholesale supplier of stationery products. It commenced trading in 2011 and now has 60 employees with separate sales and accounts departments. However at a recent board meeting, concern was expressed at some aspects of the companys internal control, including those relating to sales and trade debtors.

Jon Tan, the sales director is an excellent salesman and has been largely responsible for the companys growth since 2011 and for the implementation of the control activities exercised over the companys sales and trade debtors system. The following policies and procedures form part of the control activities exercised over that system.

1. Hashimah Sdn Bhd uses a networked integrated sales and general ledger accounts system. The companys accountant and assistant accountant, together with Jon Tan and the sales department clerks (sales clerks) have full access to all sales ledger files including the master file.

2. Requests from potential customers to open a credit account are forwarded to Jon Tan, who carries out full credit checks before deciding whether to grant a credit facility. When credit facilities are granted a sales clerk updates the sales ledger master file with the new customer details. Credit limits are not applied to customer accounts as Jon Tan considers this to be a restricting factor in achieving sales targets. Slow or late paying customers are pursued for payment by Jon Tan.

3. Customer orders received, in writing or by telephone, are directed to a sales clerk. After establishing that a sales ledger account exists, the clerk uses a sales invoicing programme to generate a pre-numbered sales invoice and accompanying goods despatch note addressed to customers for products as ordered. The programme prices sales invoices automatically using authorised prices stored in a standing data file. Full access to this file is restricted to Jon Tan and the sales clerks.

4. Sales clerks post invoices as prepared to Hashimah Sdn Bhds sales ledger, and the automated accounting system immediately updates the companys general ledger with the sales ledger postings. On a daily basis:

all invoices are mailed by the sales clerks to customers and the goods despatch notes are forwarded to the stores department to accompany goods as and when despatched.

a copy of each invoice is forwarded to the assistant accountant who is responsible for dealing with customers invoice queries, the issue of sales credit notes, as he deems appropriate, and the posting of credit notes to the sales ledger.

Required:

From the information provided on the sales and trade debtors system of Hashimah Sdn Bhd :

(a) Identify FIVE weaknesses in the system; (10 marks)

(b) Describe the implication of each weakness identified; (10 marks)

(c) Recommend improvements to address the weakness. (10 marks)