SpeeDIY Sdn. Bhd. is an online Do-It-Yourself (DIY) store located in Sintok that provides home delivery of DIY products purchased via the Internet. SpeeDIY uses a fully integrated accounting system and practices automated Economic Order Quantity (EOQ) model in managing its inventory. For each registered item in the inventory database, the system specifies quantity on hand and a desired quantity on hand. When the quantity on hand falls below the desired quantity on hand, a notification automatically pops up on the purchasing clerk's computer screen, alerting the clerk to reorder the item. The purchasing clerk can proceed with the reordering of items simply by checking the acceptance box. When the acceptance box is checked, the purchase order transaction file is created. In addition, the vendor is notified electronically through a transmission from the purchasing system. The purchasing clerk prepares a purchase summary report to his manager at the end of the day.

SpeeDIY warehouse has a large spacious area and stores massive quantities of inventory. There are three access doors which are opened at 8 a.m. and locked at 5 p.m. every day. Item ordered will be delivered through the main access. Every day, a high volume of items ordered are received and managed by a warehouse manager and a clerk. Due to a limited number of employees in the warehouse, staff from other departments often called to assist in receiving and storing the received items. When the items are received from the vendor, a packing slip is attached. The warehouse clerk keys in the purchase order number to retrieve the electronic purchase order from the system and accepts the purchase order as appears on the screen. The system then generates receiving summary report and updates inventory master files. Bar codes, which are automatically printed in the warehouse department, are used to label the boxes received. The items are stored in the warehouse.

Upon acceptance, accounts payable balances are updated automatically. As agreed with suppliers, all payments are due within seven days after receipt of shipped items. When a payment is due, a screen pops up in the account payable clerk's computer notifying that a payment is to be made. The account payable clerk connects to SpeeDIYs electronic banking system via the bank's website and initiates payments to all vendors via electronic transfers. A confirmation number is received from the bank simultaneously when entering the payment transaction and the account payable clerk enters the confirmation number into the SpeeDIYs computer and the account payable balances are updated.

(a) Identify FOUR (4) control weaknesses in the purchasing systems of SpeeDIY Sdn. Bhd.

CONTROL WEAKNESSES :

i) Every day, a high volume of items ordered are received and managed by a warehouse manager and a clerk. Due to a limited number of employees in the warehouse, staff from other departments often called to assist in receiving and storing the received items.

ii) Large spacious area which stores massive quantities of inventory and three access doors which are opened at 5 am and closed at 8 pm.

iii) Bar codes, which are automatically printed in the warehouse department, are used to label the boxes received. The items are stored in the warehouse.

iv) The account payable clerk connects to SpeeDIYs electronic banking system via the bank's website and initiates payments to all vendors via electronic transfers.

b ) Indicate ONE (1) possible risk exposures for each weakness in (a).

i) since staff of different department may have limited knowledge about warehouse, they can commit error in recording items. ii) since three different doors have access there can be error in recording items from different gates. iii) Automated machine is not looked after by any human in absence of employee supervision an error in bar code labelling or missing bar codes on packages can happen

iv) fraud can be committed through e payment /cyber fraud and fake creditors.

question : Suggest ONE (1) improvement in the internal control procedures to minimize each risk in (b).