Your firm, Field CPA is auditing the financial statements of Miller Mail Order, Inc. (MMO) for the year ended January 31, 2023. This is the first time Field CPA is auditing this client.

Miller Mail Order has reported Revenues in the amount of $42,000,000. All Revenues are on a credit basis. Based on your walk-through and consideration of the Audit Risk Model, you believe that controls at MMO are not very good and you have decided that the control risk is 70%.

You have also compiled a list of possible errors and fraud that may result in the misstatement of MMOs financial statements [SAS 122 Au-C Sec. 315] See Table 1 below.

	TABLE 1 Possible Errors and Fraud	Answer from Internal Control Procedures Listed Below
1.	Invoices for goods sold are posted to incorrect customer accounts.
2.	Goods ordered by customers are shipped but are not billed to anyone.
3.	Invoices are sent for shipped goods but are not recorded in the sales journal.
4.	Invoices are sent for shipped goods and are recorded in the sales journal but are not posted to any customer account.
5.	Credit sales are made to individuals with unsatisfactory credit ratings.
6.	Goods are removed from inventory for unauthorized orders.
7.	Goods shipped to customers do not agree with goods ordered by customers.
8.	Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious transactions.
	Possible Internal Control Procedures that Could Stop the Errors and Fraud
A.	Shipping clerks compare goods received from the warehouse with the details on the shipping documents.
B.	Approved sales orders are required for goods to be released from the warehouse.
C.	Monthly statements are mailed to all customers with outstanding balances.
D.	Shipping clerks compare goods received from the warehouse with approved sales orders.
E.	Customer orders are compared with the inventory master file to determine whether items ordered are in stock.
F.	Daily sales summaries are compared with control totals of invoices.
G.	Shipping documents are compared with sales invoices when goods are shipped.
H.	Sales invoices are compared with the master price file.
I.	Customer orders are compared with an approved customer list.
J.	Sales orders are prepared for each customer order.
K.	Control amounts posted to the accounts receivable ledger are compared with control totals of invoices.
L.	Sales invoices are compared with shipping documents and approved customer orders before invoices are mailed.
M.	Prenumbered credit memos are used for granting credit for goods returned.
N.	Goods returned for credit are approved by the supervisor of the sales department.