Tight Lines Fishing and Camping Supplies is a New York-based wholesaler of fishing and camping equipment that
Question:
Tight Lines Fishing and Camping Supplies is a New York-based wholesaler of fishing and camping equipment that serves fishing and camping retailers throughout the north east. You have been hired by Tight Lines to evaluate their processes. risks. and internal controls. The following paragraphs describe Tight Lines revenue cycle procedures.
Revenue Cycle
SALES ORDER PROCESSING PROCEDURES.
Wholesale customer orders are mailed, e-mailed or faxed to the sales department. When the order is received the sales clerk checks the customer's credit worthiness from a computer terminal. After the customer's credit is verified. the clerk then records the sales order through his computer terminal. A digital copy of the order is distributed to the warehouse and the shipping department terminals for further processing. The computer system automatically records the sale in the sales journal. Finally, the clerk files the hard copy of the customer order in the sales department.
The warehouse manager is prompted by receipt of the digital sales order on the warehouse terminal. The manager prints out two copies of order: the stock release and a shipping notice. Using the stock release copy. a warehouse clerk picks the selected items from the shelves and sends them to the shipping department along with stock release and the shipping notice. The warehouse manager then updates the inventory subsidiary ledger and the general ledger control account from his computer terminal.
When the shipping clerk receives the goods, the stock release. and the shipping notice, he matches them to the corresponding digital sales order displayed on his terminal. If everything matches, he prints out three hard copies of the bill of lading and a packing slip. Two copies of the bill of lading and the packing slip are sent, along with the goods. to the carrier. The stock release copy and the shipping notice are sent to the accounts receivable department. The third bill of lading copy is filed in the shipping department.
Upon receipt of the stock release and shipping notice, the accounts receivable clerk manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice. the clerk uses information on the stock release to update the accounts receivable subsidiary ledger and general ledger from his computer terminal. After the records are updated, the clerk files the stock release and shipping notice in the accounts receivable department.
Cash Receipts Procedures
Customer payments come directly to the general mail room along with other mail items. The mail clerk sorts the mail, opens the customer payment envelope. removes the customers check and remittance advice, and reconciles the two documents. To control the checks and remittance advices the clerk manually prepares two hard copies of a remittance list. He sends one copy to the accounts receivable department, along with the corresponding remittance advices. The other copy of the remittance list accompanies the checks to the cash receipts department.
Once the checks and remittance list arrive in the cash receipts department, the treasurer reconciles the documents, endorses the checks, and manually prepares three hard copies of a deposit slip. He then updates the cash receipts journal and the general ledger from his computer terminal. Next, the treasurer sends the checks and two copies of the deposit slip to the bank.
Finally, he files the third copy of the deposit slip and the remittance in the department.
When the accounts receivable clerk receives the remittance list and remittance advices from the mail room, he reconciles the two documents. He then updates the accounts receivable subsidiary ledger and the general ledger. Finally, he files the two documents in the department.
Required
a. Create a data flow diagram of the current system.
b. Create a system flowchart of the existing system.
c. Describe intemal control weaknesses in the system and discuss the risks associated with these weaknesses.
d. Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses that you identified. Explain your solution.
Expert Answer:
a Create a dat flow diagram of the current system The data flow diagram of the current system of T L Sales system can be given as under T L Sales syst... View the full answer
