The following is a description of a manufacturing companys purchasing procedures. All computers in the company are networked to a centralized accounting system so that each terminal has full access to a common database. The inventory control clerk periodically checks inventory levels from a computer terminal to identify items that need to be ordered. Once the inventory clerk feels inventory is too low, he chooses a supplier and creates a purchase order by adding a record to the purchase order file. The inventory clerk prints a hard copy of the purchase order and scans it in to the supplier. An electronic notification is sent to accounts payable and the receiving department, giving the clerks of each department access to the purchase order from their respective terminals. When the raw material arrives at the unloading dock, a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the packing slip that accompanied the goods. The receiving clerk then creates a receiving report on a computer system. An electronic notification is sent to accounts payable and inventory control departments, giving the respective clerks access to the receiving report. The inventory control clerk uses this to update the inventory records. When the accounts payable clerk receives the hard copy invoice from the supplier, she reconciles the invoice with the digital purchase order and receiving report. She then prepares the cash disbursement voucher. The voucher and the invoice are placed in the open accounts payable file in a filing cabinet until the due date for payment arrives. The accounts payable clerk also updates the subsidiary ledger and records the liability amount in the purchases journal from the department computer terminal. The accounts payable clerk periodically reviews the cash disbursement file for items due and, when they are identified, prepares a check for the amount due. Finally, using the departments terminal, the clerk removes the liability from the accounts payable subsidiary file and post the disbursements to the cash account.

Required: a) Analyze the internal control weaknesses in the system and give your responses according to the six categories of physical internal control activities specified in SAS78. [5 marks for each category noted] (30 marks)