Credit Sales System information:
Internal Controls: Customers mail or fax their purchase order documents to Pea Blossom’s sales staff. The information is keypunched into the company’s mainframe computer, which checks the customer’s approved credit limit against the customer balance master file, and, if approved, then prints a three part prenumbered sales order document. Copy 1 is sent to the credit manager Brenda Robertson for her initials to indicate approval for shipment of inventory. This approved copy is then sent to the accounting department. Copy 2 is sent to the shipping department in the inventory warehouse. Inventory (and sales order copy #2) are shipped to the customer. Copy 3 is filed in the sales department by date.
Using the approved sales order #1 from above, the Clerk in the accounting department keypunches the sales transaction into the computer, which prints a three part pre-numbered sales invoice. Copy 1 is mailed by the clerk to the customer to bill for the sale. Copy 2 is sent to the sales department where it is filed by customer name. Copy three is filed by the accounting department by numerical invoice number. By entering the sales order, the computer also produces a daily sales journal which lists all entered sales. The computer also posts each customer’s sale to the customer’s account in the accounts receivable subsidiary ledger. At the end of each month, the computer prints out monthly customer statements showing all sales activity and payments received. These statements are sent to customers.
Question A: Using the flowchart shapes icon in Microsoft Word, flowchart the described Credit Sales System. List two control strengths and two control weaknesses. Based on your understanding of the above system, assess preliminary Control Risk as High, Medium or Low for the credit sales cycle.