Question - Evaluation of Controls
Gaurav Mirchandaniis is the warehouse manager for a large office supply wholesaler. Mirchandaniis receives two copies of the customer sales order from the sales department. He elects the goods from the shelves and sends them and one copy of the sales order to the shipping department. He then files the second copy in a temporary file. Mirchandaniis retrieves the sales orders from the temporary file and updates the inventory subsidiary ledger from a terminal in his office. At that time, he identifies items that have fallen to low levels, selects a supplier, and prepares three copies of a purchase order. Once copy is sent to the supplier, one is sent to the accounts payable clerk, and one is files in the warehouse. When the goods arrive from the supplier, Mirchandaniis reviews the attached packing slip, counts and inspects the goods, places them on the shelves, and updates the inventory ledger to reflect the receipt. He then prepares a receiving report and sends it to the accounts payable department.
Required:
a. Prepare a systems flowchart of the procedures previously described.
b. Identify any control problems in the system.
c. What sorts of fraud are possible in this system?