Internal Control

Sep/Dec-19

Board of Directors
Amberjack Co

Audit of the Financial Year ended 30th April 20X5

Dear Sir,

Please be informed that we have identified some deficiencies in the sale and dispatch system after
reviewing related documentation for the control process.

So, we enclosed our recommendation to those deficiencies to improve your sale and dispatch control
system as appendix below.

Let me say this is only for the sale and dispatch system, hence, other point for control weaknesses may
be identified as per further testing.

Should have any concern, don’t hesitate to contact us.

Best Regard,
Pinfish & Co Audit Firm

Appendix

Control Deficiency Control Recommendation

Receivable Ledger clerks set the credit limits to
accept selling credit on customers.
Receivable clerks are not sufficiently senior to set
credit limits. If the limit is too high, risk of bad
debt could be too high or if the limit is too low,
loss of revenue due to overestimation of credit
risk.
The credit limit is critical factor for the
acceptance to sell customer on credit so it should
be set by the supervisor and above. The limit set
should be review by the credit controller
regularly to identify inappropriate and outdated
credit limit.

Receivable ledger clerk also put unique customer
ID and related data to the master data file.
The clerk does not have seniority enough to
access and amend the master data file. If any
error contains, loss of sale and customer good
will could be occurred. The receivable ledger
could be impact due to both error or fraud.
Amberjack Co’s three-part GDN process remains
to send to the sale order department.
As a result, sale order team could not monitor
whether the orders are dispatched to the timely
basis. If there are any delay to dispatch, loss of
revenue and customer goowill could be occurred.
Amberjack Co’s finance department should
amend the system that can only be accessed by
responsible official who have enough seniority.
The GDN process should be at least four-part
including sale order teams.
Once receiving the GDN copy, sale order team
should match in order to identify any mismatches
with sale order. These should be reviewed

Completed GDN number are the same as order
number.
This could be conflict between sales order and
goods being dispatched as a result of which
cannot be performed sequence check. The sale
invoices are usually to be raised receipt on GDN,
with same number with sale order it is difficult to
identify sale orders or GDN to raise invoices. If
sale invoices could not be issued timely basis, loss
of sales could be occurred.
Due to growth of the company, temporary staff
members are appointed to produce sale invoices.
The temporary staff may not have enough
experience to make the process regarding sales.
If any errors regarding the prices and quantities,
loss of customer goodwill and revenue could
occur.
Selling price after discount has to be manually
enter by the sale clerks on the invoices.
This could be occurred that unauthorized
discount 10% on the selling price can be made
which could be loss of revenue. Besides, the
amount manually entered could be omitted to
deduct discount which could overstate the sale
invoices and loss of customer goodwill.
Customer statement has no longer been send
out.
This indicates the company has poor credit
control after accepting the credit sale. There may
increase in higher risk of bad debts due to lack of
chasing overdue customers.
regularly to identify any fulfilled order and obtain
evidence.
Sale orders and GDN should have separate
sequence number in order to match for searching
any unfulfilled orders.
Amberjack Co’s Sales directors should consider to
discuss with HR department to recruit the
experienced permanent staff rather than
temporary staff. If only temporary staff will be
recruited, the appropriate training should be
provided before the actual job are performed.
Sale clerks are not sufficiently seniors to put sale
prices on the invoices without any authorization.
If possible, selling price should be automatically
generated from the system which can be
accessed and amended by the responsible
officials.
Credit control team should practice the
procedures to send out customer statement
regularly based on the receivable aging listing.
If any overdue customers are identified, follow up
process should performed promptly.