You are a member of the recently formed internal audit department of Hauz of Spinach. The company manufactures tinned vegetables which are supplied to hypermarkets. The management is concerned about the effectiveness of their sales and despatch system and have asked internal audit to document and review the system. Sales orders are mainly placed through Hauz of Spinach’s website but some are made via telephone. Online orders are automatically checked against inventory records for availability; telephone orders, however, are checked manually by order clerks after the call. A follow-up call is usually made to customers if there is insufficient inventory. When taking telephone orders, clerks note down the details on plain paper and afterwards they complete a three-part pre-printed order form. These order forms are NOT sequentially numbered and are sent manually to both despatch and the accounts department. As the company is expanding, customers are able to place online orders which will exceed their agreed credit limit by 10%. Online orders are automatically forwarded to the despatch and accounts department. A daily pick list is printed by the despatch department and this is used by the warehouse team to despatch goods. The goods are accompanied by a despatch note and all customers are required to sign a copy of this. On return, the signed despatch notes are given to the warehouse team to file. The sales quantities are entered from the despatch notes and the authorised sales prices are generated by the invoicing system. If a discount has been given, this has to be manually entered by the sales clerk on the invoice. Due to the expansion of the company, and as there are large number of sale invoices, extra accounts staff have been asked to help out temporarily with producing the sales invoices. Normally it is only two sales clerks who produce the sales invoices. Required: a) Describe how the auditor documents the sales and despatch system for his audit file b) Identify three (3) control objectives of Hauz of Spinach’s sales and despatch system. c) Provide four (4) weaknesses with recommendations in Hauz of Spinach’s sales and despatch system.
You are a member of the recently formed internal audit department of Hauz of Spinach. The company
manufactures tinned vegetables which are supplied to hypermarkets. The management is concerned
about the effectiveness of their sales and despatch system and have asked internal audit to document
and review the system.
Sales orders are mainly placed through Hauz of Spinach’s website but some are made via telephone.
Online orders are automatically checked against inventory records for availability; telephone orders,
however, are checked manually by order clerks after the call. A follow-up call is usually made to
customers if there is insufficient inventory. When taking telephone orders, clerks note down the
details on plain paper and afterwards they complete a three-part pre-printed order form. These
order forms are NOT sequentially numbered and are sent manually to both despatch and the
accounts department.
As the company is expanding, customers are able to place online orders which will exceed their
agreed credit limit by 10%. Online orders are automatically forwarded to the despatch and accounts
department.
A daily pick list is printed by the despatch department and this is used by the warehouse team to
despatch goods. The goods are accompanied by a despatch note and all customers are required to
sign a copy of this. On return, the signed despatch notes are given to the warehouse team to file.
The sales quantities are entered from the despatch notes and the authorised sales prices are
generated by the invoicing system. If a discount has been given, this has to be manually entered by
the sales clerk on the invoice. Due to the expansion of the company, and as there are large number
of sale invoices, extra accounts staff have been asked to help out temporarily with producing the
sales invoices. Normally it is only two sales clerks who produce the sales invoices.
Required:
a) Describe how the auditor documents the sales and despatch system for his audit file
b) Identify three (3) control objectives of Hauz of Spinach’s sales and despatch system.
c) Provide four (4) weaknesses with recommendations in Hauz of Spinach’s sales and
despatch system.
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