Nolan manufacturingcompanyretainsyou on April 1 to perform an audit for the fiscal year ending June 30.Duringthe month of May, youdidextensive studies of internal control over inventories.

All goodspurchasedpass through a receiving departmentunder the direction of the chief purchasingAgent.The duties of the receiving department are to unpack, count, and inspect the goods. Thequantityreceived is compared with the quantity shown onthe receiving department's copy of the purchaseorder. If there is no discrepancy, the purchase order is stamped"ok - receiving Dept".Andforwardedto the accounts payablesection of the accounting department. Any discrepanciesin quantity or variations from specificationsare called to the attention of the buyer by returning the purchase order to him with an explanation of the circumstances. No recordsaremaintainedin the receiving department and no reports originate there.

As soon as goods have been inspected and counted in the receiving department, they are sent to the factory productionarea and stored alone side themachines in which they are to be processed. Finishedgoodsare moved from the assemblyline to astoreroomin custody of a stockclerk, whomaintainsa perpetual inventory record in terms of physical units butnot indollars

What weaknesses, if any,do you see in the internal control over inventories?