Question

List the weaknesses and suggest improvements in internal controls related to revenue cycle.

SALES CLERK WAREHOUSE CLERK BOOKKEEPER #1 BOOKKEEPER #2 COLLECTION CLERK RECEIVES CUSTOMER ORDER BY PHONE APPROVED SALES ORDER 1 SALES ORDER SALES ORDER INVOICE CUSTOMER CHECK FROM MAIL CLERK 2 1 INVOICE 3 PREPARES 4-COPY SALES ORDER PREPARES SHIPPING ADVICE AUTHORIZED CUSTOMER'S CREDIT MATCHES INV & APPROVED SALES ORDER INFORMATION POSTS TO RECORDS STAMPS "FOR DEPOSIT ONLY" BY NUM- BER SHIPPING ADVICE APPROVED SALES ORDER SALES ORDER SALES ORDER SALES ORDER 2 SALES ORDER 3 CONFIRMATION BY CUSTO- MER 1 SALES JOURNAL DAILY COPY OF SALES JOURNAL POST TO RECORDS SALES ORDER 2 STAMPS SALES ORDER #2 # WITH DATE SHIPPED PREPARES 3-COPY INVOICE SUBSIDIARY ACCOUNTS RECEIVABLE CASH REC. JOURNAL WEEKLY COPY OF CASH REC JOURNAL FOOTS & POSTS TO GENERAL LEDGER INVOICE INVOICE SALES ORDER (DATED) 2 BY NUMBER 1 INVOICE 2 3 TO CUSTOMER RELEASES LUMBER TO CARRIER GENERAL LEDGER DEPOSITS CHECKS WEEKLY TO CUSTO MER class

Identify weaknesses in the internal control structure relating to the activities of

1) warehouse clerk

2)bookkeeper #1

3)bookkeeper #3

4)collection clerk

Answer 1

Weakness in Internal Control for following roles,

1. Warehouse Clerk- There is no maker checker policy. Nobody monitors data prepared by the warehouse clerk.

Shipping information is shared with the client but not internally this is a huge flaw, stakeholders should be able to track their shipments. Internal copy of the same is not being prepared.

He processes the order before having the approved sales order from Bookkeeper #1. The roles and duties of Warehouse clerk are not monitored and he is operating independently, there is a high risk of errors.

2 Bookkeeper #1 : The approval of credit should be followed with a serious process. In case of disputed clients, there wshould be a communication channel between collection clerk and Bookkeeper 1 as to whether they take orders from such customers or whether there are any disputes pending againsst previous orders.

Also no mechanism in case of advance collection is in place.

He is not maintaining a propoer document trail (Shipping details and carier details are absent)

3 Bookkeeper #2 : Orders are being checked after the shipments and all other processes are done. This is a weakness as there is nothing much use of checking the details after shipping. Once goods are shipped there's nothing much that can be done.

All the processes needs to streamlined and they strictly need to follow the maker checker policy.