Identify Control Weaknesses

Sales The PC network is used to manage inventory and sales orders. Sales clerks, who can read the perpetual inventory records via their PCs, take customer orders. Most orders originate from phone requests, but a few arrive in a walk-in basis and some occasionally come in the mail. Usually, building contractors or their representatives call to get current price quotes and find out if specific appliances are in stock. When goods are available and the price is satisfactory, the salesclerks issue a sales order and begin the process of filling it if it is to be picked up the same day. Orders received after 4:00 PM are not considered deliverable that day and the sales clerks so inform the buyers. In addition, sales clerks can immediately inform a caller about out-of-stock items and establish a back order for the customer. Back orders are processed early each day, but before they are filled, the sales clerks call the buyers to confirm that the orders are still valid. To originate an order, the sales clerk types the appropriate information into his or her PC: customer name and number, product identification, and order quantity. The software automatically enters date of the order on all orders as they are originated. The clerk enters the address for new customers whereas this information is supplied by the computer from a file for existing customers. The computer keeps track of all customer order information and prints an order form with the current date on it for transmittal to the controller, Jane Jones. The computer updates the perpetual inventory records at the point of order origination to avoid over-commitment of goods not available due to existing orders that are pending credit approval Every few minutes (immediately if things are slow), one of the sales clerks hand-carries the pending orders to Ms. Jones Secretary. The secretary presents them to Ms. Jones who approves them either immediately based on first-hand knowledge of the customer's credit record or after reviewing the customer's account record on her PC. Ms. Jones initials the order to indicate approval of the sale. One of the sales clerks then picks it up on the next round. After the orders are picked up, sales clerks enter the approval or disapproval codes in the order records on their PCs. An approval code triggers the printing of a three-copy sequentially numbers sales order form and moves the sales order record in the computer to the open sales order file. approval Every few minutes (immediately if things are slow), one of the sales clerks hand-carries the pending orders to Ms. Jones Secretary. The secretary presents them to Ms. Jones who approves them either immediately based on first-hand knowledge of the customer's credit record or after reviewing the customer's account record on her PC. Ms. Jones initials the order to indicate approval of the sale. One of the sales clerks then picks it up on the next round. After the orders are picked up, sales clerks enter the approval or disapproval codes in the order records on their PCs. An approval code triggers the printing of a three-copy sequentially numbers sales order form and moves the sales order record in the computer to the open sales order file. Copies 1 and 2 of the sales order form are held to be picked up by one of the warehouse clerks as soon as all previously approved orders have been moved to the loading dock for pickup. Copy 3 is forwarded to the bookkeeper, Frank Harris. These forms are filed in the open sales order (physical) file for later matching with delivery advices. Upon request, the sales clerks call back the contractors to let them know that their orders have been approved and that delivery to their driver has been authorized On the other hand, a disapproval code triggers a reversal of the perpetual inventory entry for the pending sale and removes the record from the temporary customer order file. Sales clerks then call denied buyers and inform them of the situation. If they dispute that denial of credit, they are transferred to Ms. Jones telephone extension. Delivery The sales order forms picked up by warehouse personnel from the sales clerks represent authorizations to deliver to the contractors or their representatives. Each order is assigned to a warehouse clerk who is responsible for filling it. This person typically retrieves each item with a forklift and brings it to the loading dock area of the warehouse. If the receiving driver is already there, the items are loaded directly, one at a time, until the order is complete. Otherwise, all the items are put together and a length of plastic ribbon is wrapped around them to keep them separate from the other orders. If the loading area becomes congested, care is taken to fill orders only after drivers have arrived. After an order is filled, a warehouse clerk enters the product quantities, customer number, etc. into a PC in the warehouse This triggers the printing of a computer dated, sequentially numbered four-copy delivery advice. The customer's driver signs the delivery advice to indicate receipt of the complete order and receives the first two copics. Copy 3 goes into a warehouse file in numerical order. Copy 4. along with one copy of the sales order, is deliver to Mr. Harris The warehouse clerk's working copy of the sales order is usually discarded