Internal Control Weaknesses - Manufacturing

The following describes the sales procedures for a manufacturing company:

The sales process begins in the sales department of the firm where customers submit orders by fax, e-mail, or phone. A clerk in the sales department creates a sales order that details the items needed. Next, the sales clerk performs a credit check on the customer. If it is a returning customer, then the sales clerk checks the customers payment history from the centralized credit records. For new customers, a full credit check is performed via an online credit bureau. Once the sales clerk approves the creditworthiness of the customer, he or she prints a sales order, a packing slip, and a stock release document from his terminal. The clerk adds a record to the digital open sales order file and sends the hard copy of sales order, packing slip, and stock release documents to the billing department, shipping department, and warehouse, respectively.

When the warehouse receives the stock release, a warehouse clerk arranges for the merchandise to be sent to the shipping department, along with the stock release document. Finally, the warehouse clerk updates the inventory subsidiary ledger from the terminal in the warehouse.

When the shipping department clerk receives the stock release, he compares it to the packing slip previously received from the sales department. The clerk then prepares a bill of lading, which accompanies the goods to the carrier. Finally, the shipping clerk records the shipment in the digital shipping log.

Upon receipt of the sales order, the billing department clerk adds prices and freight charges to create a sales invoice, which is sent to the customer. From the department terminal, the clerk then updates the digital accounts receivable subsidiary ledger and records the sales details in the sales journal. At the end of the day the billing department clerk prints a hard-copy accounts receivable summary and sales journal voucher, which she sends to the general ledger department.

Upon receipt of the accounts receivable summary and the sales journal voucher, the general ledger department clerk updates the general ledger and posts the voucher details to the journal voucher file from the department terminal.

Required

1. Analyze the physical internal control weaknesses in the system.