Kingfisher Ltd (Kingfisher) is a wholesaler of fishing equipment in Hong Kong. It sells to customers on credit. Customer orders are mailed to the sales department or customers key-in their orders into Kingfishers website. When the order is received, the sales clerk checks the customers creditworthiness from the computer terminal. After the customer credit is verified, the clerk then keys in the sales or ders into his computer. A digital copy of the order is distributed to the warehouse and the shipping department terminals for further processing. The

computer system automatically records the sales in the sales journal.

Finally, the clerk files the customer order in the sales department. After receiving the electronic sales order, the warehouse manager prints out two reports: the stock release and the shipping notice. Using the stock release copy, the warehouse clerk picks the selected goods from the shelves. The goods, accompanied by both documents, are sent to the shipping department. The warehouse manager then updates the inventory subsidiary ledger and the general ledger from his computer

terminal.

Once the shipping clerk receives the goods, the stock release, and the shipping notice, he matches them to the corresponding digital sales order from his terminal. Assuming everything matches, he prints out three hard copies of the bill of lading and a packing slip. Two of the bill of lading copies and the packing slip are sent, along with the goods, to the carrier. The stock release copy and the shipping notice are sent to the accounts receivable department. The third bill of lading copy is filed

in the shipping department.

When the accounts receivable clerk receives the stock release and shipping notice, he manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice, the accounts receivable clerk goes to his terminal and updates the accounts receivable subsidiary ledger and general ledger with the information on the stock release. After the records are updated, the clerk files the stock release and shipping notice in the accounts receivable department.

Customer payments come directly to the general mailroom along with other mail items. One mail clerk sorts the incoming mail, opens the customer payment envelopes, removes the customers cheques and remittance advice slips and reconciles the two documents. To control the cheques and remittance advice slips, the same mail clerk manually prepares two hard copies of the remittance list. He sends one copy to the accounts receivable department along with the corresponding remittance advice slips. The other copy of the remittance list accompanies the cheques to the cash receipt department. The cash receipt clerk deposits the cheques at the bank on the next working day and updates the general

ledger.

Required:

1. Develop a context diagram and a level 0 data flow diagram for the revenue cycle of Kingfisher Ltd.

b) Identify four internal control problems in the revenue cycle of Kingfisher Ltd. For each internal control problem, recommend an appropriate internal control.