GGG Electronics builds short-wave radios. Its manufacturing plant is also a warehouse. When parts are received, the receiver compares the type of goods and quantity to a copy of the purchase order available online. If the quantity received differs from the quantity on the purchase order, the receiver adjusts the purchase order amount online. When the goods are checked by the receiver, she sends an e-mail to the accounting department, recording the type of goods, quantity, and date received. The accounting department uses the e-mail to create a receiver's report, and the purchase order is then printed and filed in the accounting department. The online system allows the company to reduce paper, as a hard copy is not needed until the goods are actually received. The company's order-entry and tracking system automatically assigns the next number in a series to the purchase order just before printing.
Inventory is physically moved to the warehousing area, which is located in a locked-up area at the end of the plant. There is a stores department in a separate area for supplies such as gloves, wire, and adhesives, all of which are used in significant quantities on a regular basis. When an assembly line worker requires supplies, the supervisor fills out a serially pre-numbered requisition card, signs it, and gives it to the worker, who then takes it to the stores department to obtain the needed items. Each supervisor has a stock of requisition cards. When the supplier's invoice is received by the purchasing department, one of the purchasing department staff sends an e-mail to the accounting department, noting the invoice amount, supplier name, date of shipment, and type of goods. The accounting department then matches these items to the purchase order and receiving report, and prepares a cheque for the controller to sign.
The controller does not sign the cheque until she also receives an e-mail from the accounting staff indicating that the purchase order, receiving report, and invoice have been matched.
Required
(a) List four internal controls that appear to be effective in GGG's system.
(b) List three examples of weak internal controls in GGG's system. Explain why each of your examples would be a weak control.