Bestwood Ltd. is planning to replace its computerized sales accounting system. The managing director has asked for your advice on certain matters relating to the new system.

The existing system uses the computer to produce sales invoices from handwritten shipping documents, posts them to the accounts receivable ledger, records cash received, and produces an aged analysis of receivables. The main weaknesses of the existing system are that many documents are still handwritten or typed and it is possible to deliver goods to customers with poor credit ratings, thus creating excessive collection costs and a high level of bad debts. The managing director suggests that the new system should:

1. produce the order confirmation

2. produce the shipping note when the goods are ready for delivery

3. produce the sales invoice at the same time as the shipping document, using information from the shipping document and prices from a master price list, and post the invoice to the accounts receivable ledger

4. record receipts of cash from customers on the accounts receivable ledger and in the cash book Access to the system will be from terminals and controlled by the use of passwords and by restrictions on the tasks that can be performed from specific terminals.

In view of the large number of orders, the managing director wants the computer to perform credit checks on customers with minimum intervention by the credit manager. The credit checks by the computer will use data input into the system by the credit manager and information on the customer master file.

When the programmed criteria decide that goods should not be sent to a particular customer, the credit manager may override the computer.

Required

a. Describe the controls the computer system should exercise before:

i. confirming a customer’s order

ii. creating a shipping document authorizing the delivery of goods to the customer

b. Describe the controls that should be exercised over:

i. changing customer details, including adding new customers, amending details of existing customers, and deleting customers

ii. changing customer credit limits

iii. changing selling prices of goods

c. Describe:

i. the credit criteria that the computer system should use to authorize delivery of goods to customers

ii. the manual procedures the credit manager should undertake when overriding the computer