I need help identifying contol weaknesses and providing recommendations to prevent the weaknesses for this company

Order-to-cash process at Sweet Waters Beauty Inc.

Sweet Water Beauty Inc. (SWB) sells beauty supplies including high-end jewelry (e.g. pieces over $10,000 per item) mainly to other businesses across America. SWB continues to grow despite the impact that COVID-19 is having on our economy. Prior to the pandemic, SWB has grown steadily over the last 5 years. Sales are beginning to improve although sales have not reached pre pandemic levels.

SWB found a niche in taking orders and immediately fulfilling them around the clock. SWBs customers work at unusual hours and it has been able to build loyalty with its always open mantra. This practice, along with competitive pricing, has allowed SWB to build a loyal network of customers.

SWB processes most sales digitally; yet, employees still perform a valuable role in the process. The sales process at SWB involves employees working in four different roles: sales clerks, sales managers, inventory clerks and accounting clerks. There are multiple employees who function in each of these roles, and all employees in a role can perform the activities related to their role. Because the process is highly digitized, it is common to have many different employees perform the tasks related to one transaction.

The process begins when SWB receives an order from a customer via phone or online or Facebook. For a phone order, the sales clerk enters the customer information into the computer system and then the system automatically creates a purchase order and logs the information in the sales database. For an order taken online or via Facebook, the customers information is digitally captured in the computer system, then the system automatically creates a purchase order and logs the information in the sales database. Most of SWBs customers are businesses, so it does not collect payment at the time of the order. Instead, SWB bills them after the customer receives the inventory they have ordered.

The sales clerk reviews the order and determines whether the customers credit should be approved by the sales manager to make the sale. The credit approval process requires judgment. All sales more than $11,000 must be approved by the manager. Sales less than this threshold may require approval, depending on the sales clerks judgment.

If the order needs sales manager approval, the sales clerk digitally sends the order to the sales manager. The sales manager reviews information in the sales database and uses their professional judgment to decide if the customers credit is sufficient. If the customer does not have sufficient credit, the sales manager updates the digital purchase order to show that the order is rejected (which is logged in the sales database). The sales manager then notifies the customer that the credit is not approved and the process is ended.

If the customers credit is approved, the sales manager digitally signs the purchase order in the sales database. The system then creates a digital picking ticket. If the customer did not need credit approval, the system automatically creates the digital picking ticket upon the approval of the sales clerk. Once the picking ticket is created, the sales database is automatically updated.

Inventory clerks in the warehouse receive notification of the digital picking ticket and use the digital picking ticket to pick and package the inventory. The inventory clerks open the digital bill of lading and print a copy of the digital bill of lading and packing slip, which are included with the inventory sent to the customer. The inventory clerk digitally signs off that they performed the task. If the warehouse does not have all of the ordered inventory, the company ships the goods it does have and the system creates a new digital picking ticket for the non-shipped items. The company then fills the new digital picking ticket once the inventory is in stock.

Once the inventory clerk has finished entering their information into the sales database, the system automatically creates a digital sales invoice. An accounting clerk reviews the digital sales invoice for completeness and accuracy by comparing the sales invoice to the purchase order and the picking ticket.

If the information does not match, the accounting clerk notifies the sales manager, who investigates and corrects the problem. If the sales invoice is accurate and complete, the accounting clerk digitally signs that the review is complete. The system automatically sends the customer the approved sales invoice via email.

The process continues when the customer pays for their order. Customers can make an electronic payment (automated clearinghouse or wire transfer) or pay with a check. When the customer pays with a check, three accounting clerks open the mail and immediately endorse the check as for deposit only and then enter the check details and the information from the remittance advice into a digital cash receipts pre-list, which is stored in the sales database. Three clerks open the mail together to prevent one clerk from misappropriating assets, creating a kiting scheme or other fraudulent activities. If the customer pays electronically, the system automatically enters the information into the sales database. The accounting clerks also scan any remittance information, which is stored in the sales database, and the physical remittance document is shredded. Scanning and shredding are noted in the database when they are completed.

All endorsed checks are sent to the sales manager. The sales manager prints a deposit slip and takes the deposit slip and endorsed checks to the bank on the same day the cash is received.

At the end of each week, the bank sends an email acknowledging all deposits for the day. The sales clerks verify that the bank deposit amount (excluding electronic deposits) matches the amount on the cash pre-list. If it does, the sales clerk adds their digital signature that they reviewed the match. If it does not, the sales clerk contacts the controller weekly for further investigation and follow-up.

On special occasions, cash is sent electronically via Paypal or Zelle. Either the sales clerks, sales managers or inventory clerks will be contacted for verification of account information, including SSI and company debit card/PIN number prior to sending or receiving cash.

REQUIRED: In a memo to management, identify the control weaknesses at Sweet Water Beauty Inc. Describe the potential threat and exposure associated with each weakness and recommend how to best mitigate each risk.

Item 1: Identify the control weaknesses at SWB;

Item 2: Provide recommendations to mitigate each risk or weakness.