PART 1: REVENUE CYCLE (SALES ORDER PROCESSING)

You have been hired to evaluate the sales order processing system and internal controls of AVA Group Sdn Bhd. AVA Groups needs recommendation for improvement especially on embedding information technology into the present system. The sales order processing system is as follow:

Sales department. The sales order process begins with the customer orders which commonly mailed or fixed to the sales department. Then, the sales clerk checks the customer's credit from a computer terminal. After the customer's credit verified, the clerk then keys in the sales orders into his computer terminal.A digital copy of the sales order is sent to the warehouse and the shipping department terminals for further processing. The system automatically records the sales in the sales journal. Finally, the clerk files the hard copy of customer order in the sales department.

Warehouse. The receiving of digital sales prompted automatically on the terminal in warehouse. One received, the warehouse manager prints out a copy of stock release and shipping notice. Using the stock release copy, the warehouse clerk picks selected goods from the shelves. The goods, together with the shipping notice are sent to the shipping department. The manager sends the stock release copy to the account receivable department. The manager sends the stock release copy to the account receivable department, then updates the inventory subsidiary ledger and the general ledger from his computer.

Shipping Department. Once shipping clerk receives the goods and the shipping notice, he matches them to the corresponding digital sales order from his terminal. Then, he prints out three copies of the bill of lading and a packing slip. Two of the bill of lading copies and the packing sleep are sent, along with the goods, to the carrier. The stock release copy and the shipping notice are sent to account receivable department. The third bill of lading copy is filled in the shipping department.

Account Receivable. Once the account receivable clerk receives the stock release and the shipping notice, he manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice, the clerk enters to his terminal and updates the account receivable subsidiary ledger and general ledger. After the records are updates, the clerk files the stock release and shipping notice in the account receivable department.

REQUIRED:

a)Discuss FIVE (5) weaknesses in the existing system and recommend FIVE (5) relevant controls to improve the current procedures. Your answers should be written in the following format.

Weaknesses Control Procedures