a. Internal control strengths in PEI's system include:
Automated customer credit limit master file. Allows automated checking of a customer's credit line on a real-time basis before sales orders are filled. *
The Credit Manager establishes credit limits for new customers on a daily basis so that credit-worthy customers may have their orders filled in a timely manner. *
Real-time customer credit checks before orders are processed. *
Aging reports provided to the credit manager allows for rapid detection of overdue and near overdue accounts so that corrective action can be taken. *
Customer is not billed until the order has shipped.
Shipping and Receiving accept and inspect returned materials to assure the receipt and identification of damaged materials and to limit credit returns. *
Credit manager issues credit memos for returned merchandise. *
Warehouse personnel confirm the availability of materials to fill orders and prepare back-orders for sales orders that cannot be filled with current stock. *
General Accounting posts changes to the general ledger master file after accessing the accounts receivable master file, electronic sales, and credit memo files.
b Internal control weaknesses in PEI's system, and solutions to those weaknesses include:
Weakness 1: The Credit Department only checks the aging report from Accounts Receivable at month-end, which delays the identification of slow or non-paying customers for potential credit status changes.
Correction: Revise the aging report process to produce an exception report whenever a customer exceeds their credit limit. The exception report should automatically be sent to the credit manager by email so that corrective action can be taken in a timely manner.
Weakness 2 Customer credit requests for sales returns are not compared to materials received, which might result in credits to customer accounts for goods not returned or...
Please join StudyMode to read the full document