Reference no: EM132919101

You are undertaking the audit of Blair Pty Ltd. Your assessment of controls has revealed that Blair processes its sales transactions in the following manner:

• Customers purchase products directly from sales assistants who prepare sales invoice in triplicate which is not pre-numbered. The first two copies of the sales invoice are given to the cashier. The third copy of the sales invoice is retained by the sales assistants. Where the sale is payed for in cash, the payment is also given to the cashier by the sales assistants.
• When the sale is on credit, it is approved by the cashier, who makes reference to an approved credit list. All exceptions to the credit list have to be cleared by the cashier at their discretion.
• Having received payments and approving the credit sales, the cashier approves the second copy of the invoice and gives it to the customer. The following day, the cashier summarizes the sales and cash receipts and forwards the cash (including checks) and the first copy of the sales invoices to the accounts receivable clerk. The accounts receivable clerk balances the cash received with cash sales invoices and prepares a daily sales summary. The credit sales invoices are posted to the accounts receivable ledger and then all invoices are forwarded to the inventory clerk for posting to the inventory control card. After posting, the inventory clerk posts the daily sales summary to the cash receipts book and the sales journal, and files the sales summaries by date.

Required:

Problem 1: Identify three (3) weaknesses with the existing internal control system over sales and list two (2) recommendations to management as to how they can improve the identified internal control systems weaknesses.