Activity 2.1 B - Some of the review questions in AIS Chap 4. PDF

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Some of the review questions in AIS Chap 4....

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Name: Krezzel Joy M. Lazarina Instructor: Mrs. Rosemarie P. Duhaylungsod

Course & Year: BSA-II Class Time: 10:00AM-12:00NN

Activity: 2.1.B Essay Case 1 What role does each of the following departments play in the sales order processing subsystem: sales, credit, and shipping? Discuss each. (10 pts) Sales The order information is received by the sales department from the customer by mail, phone, or in person. The activities involved in receiving and processing a customer order, completing the order, and sending items to the client, paying the customer on time, and appropriately accounting for the transaction. Information is captured on a sales order form which includes customer name, account number, name, number, and description of items ordered, quantities and unit prices plus taxes, shipping info, discounts, freight terms. In short, this is the very first thing that is needed when purchasing a product or recording the sales. Credit The credit department provides transaction authorization by approving the customer for a credit sale and returns and allowances. Shipping In this department, they receive information from the sales department in a form of the packing slip and shipping notice. The paperwork is reconciled with the release paper when the products have arrived at the warehouse. The products have been packaged and labeled. There is a packaging slip included. The shipment notice is forwarded to billing. The cargo will be accompanied by a bill of lading.

Case 2 When Clipper Mail Order Co. receives telephone and fax orders, the billing department prepares an invoice. The invoice is mailed immediately. A copy of the invoice serves as a shipping notice. The shipping department removes inventory from the warehouse and prepares the shipment. When the order is complete, the goods are shipped. The clerk checks the customer’s credit before recording the sale in the general journal and the account receivable subsidiary ledger. The receptionist opens the mail and lists all payments. The receptionist also handles all customer complaints and prepares sales return forms for defective merchandise. The cashier records all cash receipts in the general journal and makes the appropriate entry in the accounts receivable subsidiary ledger. The cashier prepares the daily bank deposit. Identify and describe 10 internal control weaknesses at Clipper Mail Order Co. (10 pts) The situation was all about how the Clipper Mail Order Co. prepare their sales order. But there are some internal control weaknesses that was depicted upon the procedures. These are the following: 1. There is no sales order that is prepared. Upon receiving an order, they immediately put a bill on it without even getting information of the buyer, which is a vital information in receiving an order. 2. Before sending the merchandise, credit should be verified. It was also not checked first. The credit approval procedure is an authorization control that should be executed independently of the sales activity. 3. Before the products are shipped, invoices are mailed. This could lead to fraud because the company give false information to the client. Billing before shipping promotes inefficient processes and inaccurate record keeping. 4. The shipping department has access to the warehouse. This was thoroughly discussed by our teacher that these two departments must have their own access because it would be prone to manipulation of products. 5. The tasks of keeping records are not separated. From the situation given the general ledger id not separated from subsidiary ledger. 6. The mail is only opened by one individual. A mail must be checked by a reliable individual for it can also lead to misleading information of an order.

7. The management has not authorized the sales return forms. The authorization of the management is a must for it will verify if the transaction is valid or the item is really a returnable one. 8. The responsibilities for custody and record keeping are not separated. Independency in keeping records is important in an organization and if it is not separated it will lead to high exposure of risk. 9. The cashier is in charge of cash, writes journal entries, and keeps the A/R ledger up to date. The person in charge can freely falsify the information since he was the one who is in charge of everything. 10. The cashier is in charge of the money and handles client concerns. This is the same instance of the given internal control weakness that was stated in number nine. The information might not be reliable enough since it was managed by one person....