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You are an Audit Manager on the audit of a sports company that is a wholesaler of a wide variety of sportswear and sports equipment
You are an Audit Manager on the audit of a sports company that is a wholesaler of a wide variety of sportswear and sports equipment to gyms and Sports retailers. Sports sell all its goods exclusively on credit.
You received the following information from the Financial Manager, Lee, relating to receiving customers orders and the authorisation of sales transactions:
All orders are received either by email or phone.
Customers, at times, place orders via phone and after a few days, will send an email to confirm the phone order.
When a customer calls to place an order on the phone, it is answered by Mercy, the sales order clerk. When he receives the call and he recognises the customer's voice, he will not ask for the customers name and he does not confirm that customers account number.
Mercy keeps an updated hardcopy list of the debtors that reflects the customers name, account number, address and contact details. In addition, he has an updated hardcopy price list to check prices of the sportswear and sports equipment.
If Mercy is satisfied that the caller is an account holder, he fills out one copy of the internal sales order ISO by inserting the customer account number per the debtor's list and records the description and quantity of goods.
After Mercy actions the above, he ends the call with the customer and thereafter completes the ISO by filling out the customer's name and delivery address and lastly signs the ISO.
If the caller is not an account holder, Mercy fills out a new customer form by obtaining information from the new customer over the phone. The information provided is the new customers delivery address, contact details, bank details and three trade references. Thereafter, Mercy will fill out an ISO in the same way he does for an existing debtor except for filling in the customer's account number.
At the end of each business day, Mercy will place the existing debtors'
ISOs on the desk of the warehouse controller, Henn The ISOs of the new debtors are given to the debtors' clerk, Mandy
Mandy then goes ahead and creates a customer account number, files the new customer form and updates the debtors list.
REQUIRED:
Identify and explain the internal control weakness in receiving customer orders and sales authorisation as described in the scenario. Identify internal control weaknesses with explanations
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