Identify 2 inherent risks affecting both businesses

Identify 2 control risks affecting both businesses

company 1: GGG Electronics builds short-wave radios. Its manufacturing plant is also a warehouse. When parts are received, the receiver compares the type of goods and quantity to a copy of the purchase order available online. If the quantity received differs from the quantity on the purchase order, the receiver adjusts the purchase order amount online. When the goods are checked by the receiver, she sends an email to the accounting department, recording the type of goods, quantity, and date received. The accounting department uses the email to create a receivers report, and the purchase order is then printed and filed in the accounting department. The online system allows the company to reduce paper, as a hard copy is not needed until the goods are physically received. The companys order-entry and tracking system automatically assigns the next number in a series to the purchase order just before printing. Inventory is physically moved to the warehousing area, which is located in a locked-up area at the end of the plant. There is a stores department in a separate area for supplies such as gloves, wires, and adhesives, all of which are used in significant quantities on a regular basis. When an assembly line worker requires supplies, the supervisor fills out a serially pre-numbered requisition card, signs it, and gives it to the worker, who then takes it to the stores department to obtain the needed items. Each supervisor has a stock of requisition cards. When the suppliers invoice is received by the purchasing department, one of the purchasing department staff sends an email to the accounting department, noting the invoice amount, supplier name, date of shipment, and type of goods. The accounting department then matches these items to the purchase order as well as the receiving report and prepares a cheque for the controller to sign. The controller does not sign the check until she also received an email from the accounting staff indicating that the purchase order, receiving report, and invoice have been matched.

Company 2: GGG Electronics sells its products to clients ranging from proprietorships to medium-sized entities. The company is controlled by two family members, and most of the employees are casual staff employed during the busy seasons (November 1 through April 30). The companys managers feel that on-the-job training is adequate for their needs and that the labor savings from using temporary staff are reflected in the profits earned for the family each year. The company has made a niche in its market by guaranteeing excellent and quick customer service. When a customer order is received, either by phone or by fax, the Customer Service Clerk (CSC), who takes the order checks that the company has the goods in stock and the correct price by checking an online database of inventory on hand. If the goods are available, the clerk then phones the customers to verify the order, including both quantity and price for each item and the extension for the entire order. The clerk then prepares a sales invoice and faxes a copy to the customer. The companys policy is for the sales invoice to show a shipping date of one day from the order date. The clerk then walks to the warehouse (adjacent to the sales office), selects the goods, and takes them to shipping. The company has a shipping staff of four people, and the shipping department will not ship any goods without a sales invoice initialed by the CSC. The shipping department is determined to reduce the number of shipping errors. This year, only nine shipments have occurred in which the sales invoices were not initialed and attached to the shipping bill. One of these turned out to be an urgent shipment to a long-time customer that was sent on the managers verbal instructions. In that case, the shipping clerk had indicated that the manager had provided a sales invoice within one day for the shipping records. Another shipment resulted in the CSC being fired for fraud when it was discovered that he sent a shipment of goods to a friend below cost. Therefore, only the other seven shipments were considered to be true errors. If the sales invoice does not indicate who is to pay the shipping costs, then the company sends the goods FOB shipping point. When a shipment occasionally is delivered to an incorrect address, it is the CSCs responsibility to contact the customer and obtain the correct information. If the account is unpaid after the due date (30 days), the receptionist mails a reminder invoice to the customer. If the account remains unpaid after 60 days, the receptionist pulls the sales invoice and gives it to the CSC who made the sale. The CSC is then responsible for contacting the customer by phone to determine if there is a problem.