QUESTION 2

1. Workspace Incorporated (WI) is a retail store that sells solid wood office furniture. The company has ten stores over GTA region. WI's internal controls over sales are as follows:
2. - A typical client would be a lawyer or an accountant whose purchase will reflect their high status. Each customer is met by a salesperson. The salesperson helps the customer pick the furniture which will fit their needs. WI finds that this "bespoke" service is the best model for customers who have already decided that the extra expense of buying solid wood furniture is worth it.
3. - All sales are recorded on sales order blanks. A box of prenumbered sales orders is kept in the Store Manager's office which is locked when the Store Manager is not in. At the start of each shift, a salesperson will take a bunch of blank orders to get them through their shift.
4. - As the salesperson works with the customer, they write down the number and quantity of furniture items requested. When the order is complete, they ask whether the customer would like to pay for the entire order or finance the purchase. If the customer is paying for the entire order, the salesperson will check them out by entering the items into the register. Only debit or credit card sales are permitted - no cash purchases.
5. - If the purchase is to be financed, the Store Manager can approve finance credit up to $10,000. Above $10,000, the Store Manager must send the information to Chloe Tsing, the VP Sales and Marketing. When Chloe goes on vacation, she instructs the store managers to break the orders up into smaller orders each for less than $10,000 so that the store manager can approve each order separately.
6. - When the sale is either paid for or financed, the customer gets one copy of the sales order and a receipt. The salesperson keeps one copy of the order and receipt for sales records and takes two copies of the order to the Store Warehouse Manager.
7. - The Store Warehouse Manager checks inventory and confirms shipping arrangements with the customer. Items are typically shipped the next business day.Shipments are usually from the store warehouse which in turn may require an inventory request from the central warehouse.
8. - When shipped, the shipping clerk uses one copy of the sales order to confirm all products shipped match the order and that the order is complete. The shipper then signs both copies of the order.
9. - The Store Warehouse Manager keeps the signed copy and sends the last copy to the head office accounting where sales are entered into the general ledger. The Store Warehouse Manager regularly reconciles sales orders with both shipments and remaining inventory.
10. Required:
11. a. (8 marks)Evaluate the system of sales controls at Workspace Incorporated.
12. b. (4 marks)Overall, do you think you can rely on the system of controls or will you have to expand your year-end work to compensate for weaknesses? Justify your answer.