INTERNAL CONTROLS AND FLOWCHART ANALYSIS a. Identify the physical control weaknesses d...

(iii) Even before the shipment of goods and no confirmation of shipment and quantity shipped, the billing department bills the customer. The billing process should be initiated through shipping notice.

(iv) The account summaries from Billing, AR, Inventory Control and Cash Receipts, and journal vouchers should not be received by the General Ledger in Data Processing Department. The General Ledger, instead, updates the GL accounts through misappropriation of source documents.

(v) The processing of cash receipts and maintenance of AR subsidiary records should not be processed by Accounts Receivable.

(vi) Warehouse Clerk, who is responsible for maintaining the physical inventory, should not perform other duties like, maintaining the inventory subsidiary records.

b.

The IT Controls that should be in place for the flowchart depicted in problem 2 are as follows:

(i) Credit check would stop the sales of goods on account to an incorrect customer.

(ii) Supervision will detect the fraud when the clerk opens the mail and steals remittances.

(iii) Customer complaints when monthly statements failed detects that there is something wrong in remittances.

(iv) Weakness in the shipping of goods can be controlled, but the shipping department does not inform the billing department and the customer has also not received any invoice can be detected by the billing department when it matches the stock release copy of the sales order from the shipping department with the invoice, ledger and file copies of the sales order which are sent directly to the billing and then mails the invoice to the customer. After a definite passage of time, billing department should examine any matchless invoice, ledger and file copies of the sales order.

(v) Credit memo should be approved after confirming the comeback of merchandise based on confirmation from the person who has taken delivery of the merchandise.

(vi) Customer credit should be confirmed by the credit department decrease commission for sales returns.