I have to make a flow chart regarding the sales order and cash receipts of a company called Masterpiece Mantels. Below is their process. I also have to identify weaknesses in their process and suggest internal control activities that can be added to the process in order to mitigate the risk of fraud and misstated financial statements.

Customer places order online or over the phone

Clerks in Sales Department receives data and enter it in the computer terminal and that creates a customer order

The salesclerk also prints a copy of the customers order and files it in their department

A digital copy of that customer order then gets sent to the warehouse and the shipping department via those computer terminals

The manager of the warehouse gets a notification once that digital customer order is in their system.

The manager in the warehouse will print two copies of it. One is to be used as a stock release so that the warehouse clerk can pick the goods and the other copy is used as a shipping notice.

The manager of the warehouse also checks the goods first and the warehouse manager also accesses the accounting system through the warehouse computer terminal to update the inventory subledger and the general ledger.

This is done right before the goods and the stock release as well as the shipping notice gets sent to the shipping department.

Then the clerk in the shipping department will match the goods, the stock release, and the shipping notice to the digital copy of the customer order that shows up at their computer terminal.

In that shipping department terminal, the clerk will match everything up and then digitally approves the printing of the bill of lading and the packing slip. One copy of the packing slip gets printed. This is for the bill of lading, one copy is printed and kept in the shipping department. The one other copy is sent with the packing slip and the goods themselves to the trucking company so that they can deliver the products to the customer.

The stock release and the shipping notice those two documents get sent to Accounts Receivable. The clerk in accounts receivable will then create a digital invoice and compare that to the shipping notice and the stock release and when they match, they’ll email the digital invoice to the customer.

After emailing the customer the clerk is able to update the digital accounts receivable subledger and the sales journal as well as the general ledger from their computer terminal. The digital invoice also gets sent to cash receipts.

The shipping notice and the stock release are filed right there in the Accounts Receivable department and that pretty much closes out the sales part of the process. Customer payments are received through electronic fund transfers to our bank account. No payments are physically received in the office when the customer initiates payment through the website which is automatically linked to the bank accounts. The customer can enter credit card information or checking account information directly on the website. Once the customer confirms that payment the data gets sent directly to our bank and we receive notification via email in our cash receipts department. Then the clerk in that cash receipts department reconciles the payment confirmation email that they got from the bank with the digital invoice. If there are no errors, they’ll make an entry in the accounting system to update the cash receipts journal.

The cash receipts clerk updates the cash receipts journal, and they will also update the accounts receivable subledger and the general ledger.

At the end of the day our treasurer accesses the online banking system. They check to make sure that the cash was deposited and that it matches what was entered in the cash receipts journal. But for the cash receipts journal the treasurer only has viewing access in the system they can’t make any entries in the cash receipts journal.