Andaz Co. manufactures and distributes car tyres to a wide customer base both in Singapore and Malaysia. Its year end was 31 December 2020. You are an audit manager of Pinfish & Co and you are reviewing extracts of the documentation describing Andaz Co’s sales and dispatch system following completion of the interim audit. Andaz Co has grown in size over the previous 18 months. All new customers undergo credit checks prior to being accepted and credit limits are subsequently set by the receivables ledger clerks who record the new customer details, assign a unique customer number and set credit limits in the master data file. After the credit limit is set, it remains unchanged. Customers wishing to order goods, telephone the company’s sales order department and provide their unique account details. Sequentially numbered four-part sales orders are generated for all orders, after checking available inventory levels. One copy is retained by the sales ordering team to enable them to monitor progress of the sales orders, one copy is sent to the customer, one copy is sent to one of the company’s warehouses for dispatch and the final copy is sent to the finance department. Upon delivery, a three-part goods dispatch note (GDN) is completed. However, the GDN is not sequentially numbered but is assigned the same number as the order number. Due to the recent growth of the company, and as there are a large number of sales invoices, additional temporary staff members have been appointed to help the sales clerks to produce the sales invoices. The sales invoices are prepared using quantities from the GDNs and prices from the authorized sales prices list, which is updated every six months. This year, in line with its main competitors, the company offered a 10% discount on all orders placed during one weekend in late November. Where a discount has been given, this has to be manually entered by the sales clerks onto the sequentially numbered invoice. Required:
(i) Identify and explain FIVE (5) weaknesses in Andaz Co’s sales and receivables system.
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(ii) Recommend improvements to address the weaknesses.
(You should use a TWO (2) column format using the headings ‘Weakness’ and ‘Improvements’.)
(b) Identify and explain the FIVE (5) components of an entity’s internal control.