When Clipper Mail Order Co receives telephone and fax orders, the billing department prepares an invoice. The invoice is mailed immediately. A copy of the invoice serves as a shipping notice. The shipping department removes inventory from the warehouse

Question

and prepares the shipment. When the order is complete, the goods are shipped. The clerk checks the customer's credit before recording the sale in the general journal and the account receivable subsidiary ledger. The receptionist opens the mail and lists all payments. The receptionist also handles all customer complaints and prepares sales return forms for defective merchandise. The cashier records all cash receipts in the general journal and makes the appropriate entry in the accounts receivable subsidiary ledger. The cashier prepares the daily bank deposit. Describe at least four internal control weaknesses at Clipper Mail Order Co

Answer 1

no sales order is prepared;
credit should be checked before shipping the items;
invoices are mailed before the goods are shipped;
shipping has access to the warehouse;
record keeping duties are not segregated (general ledger from subsidiary ledger);
only one person opens the mail;
sales return forms are not authorized by management;
custody and record keeping duties are not separated;
the cashier has custody of cash, makes journal entries, and maintains A/R ledger;
Cashier has custody of cash and handles customer complaints (e.g., about unrecorded payments).