You are the Audit Senior of Hyde & Associates. Your firm has commenced the audit of Townsend Flooring Ltd (Townsend). At the request of the engagement partner, you ascertained the following information about the operations of the company:

Townsend is a retailer of luxury range of carpets, wood flooring, laminates and rugs. The company has a total of twenty retail outlets in Greater London. Townsends draft accounts showed profit before tax of 120 million for the year ended 31 May 2020.

Townsend sells its products to a wide range of customers, including individuals, companies and independent trade persons. Most of the companys sales are made in-store but a significant proportion is made by telephone orders. Townsends online sales is relatively small but is growing steadily. The company has one large warehouse in Braintree in Essex, from where all deliveries are made.

Sales order and despatch

Townsend publishes a price list which is updated from time to time in response to changes in the prices of its major competitors. In order to be able to respond quickly, any of the sales assistants could access the computer master file to amend prices, based on information from the companys market intelligence team.

Essential details of telephone orders are entered in notebooks as the calls are received by the sales assistants and these details are input into the computer at the end of each day. Individual customers making telephone orders must pay in full for the orders. Corporate entities and most independent tradespersons are account holders, and they are billed every month.

A daily listing of telephone orders is prepared by the sales team and sent electronically to the warehouse and the accounts department. At the warehouse, a pre-numbered goods despatch note (GDN) is electronically generated for each order, where the products are available in inventory, and the order is then despatched the same day. Where the products are not available in inventory, the order is stored in a pending file kept at the warehouse and the order is fulfilled when the inventory is replenished. The accounts department uses information from the daily listings to send invoices to account holders.

Floor fitting service

Townsend also offers a floor fitting service for its products purchased by customers. As there may be variations in customers floor space, the flooring fitting expert determines the fitting charge on attending each job and applies an appropriate discount. On completion of the job, customers with online banking facilities could pay for the fitting charge online, directly into Townsends bank account. Other customers are required to pay cash to the flooring fitting expert who issues an official receipt for the payment. The flooring fitting experts are required to pay-in all cash collections at any branch of the companys bank by the close of work on Fridays. In addition, scanned copies of the pay-in slip must be sent electronically to the Accounts department.

Online presence

Two years ago, Townsend started selling its products online. Recently, the company had received several complaints from customers about wrong products, incorrect prices and mixed orders. A recent systems audit revealed that the general and application controls were inadequate.

Required:

i. Identify and explain FIVE weaknesses in the revenue system of Townsend and suggest the improvements you would advise to overcome these weaknesses.

ii. Explain general and application controls and provide two examples of each type of control which should be present in Townsends online sales system.