Suggested Solution 21 - Beats Co

(b)
Control Deficiency Control Test of Control
Recommendation
The approved suppliers The approved supplier list Obtain the log of changes
were all set up in the should be reviewed and to the approved supplier
system two years ago as a updated at least annually list and ensure that the list
part of improvements in by the purchase director. has been reviewed and
the integrated software. This will ensure that only updated within the past
suppliers that provide year.
value for money are set up
The suppliers may not all in the integrated software.
be providing value for Discuss with management
money and may be the basis for selecting
overcharging Beats for suppliers in the list and
poor quality. This may inquire about the
affect the product and may frequency of updating the
lower customer goodwill. supplier list.
The team at the The warehouse team Obtain and review a
warehouse check the should match the goods sample of GRNs to
goods received physically received with the confirm that they have
to ensure that goods being purchase order at the time been signed by
put into production are of of preparing GRN and warehouse team as
appropriate quality or else should sign the GRN as evidence of the quality
production will be held up. evidence of the check quantity check.
being performed.

The warehouse team

does not reconcile the
goods received with the
purchase order and may
accept the wrong quality
or quantity which would
affect production.
A copy of these GRNs is A copy of the GRN should Review the file of copy
sent to accounts and one be sent to the ordering GRNs held by the
copy is maintained at the department that should purchase ordering
warehouse. match them with the department and review for
relevant purchase orders evidence that these are

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The GRN copies are not
sent to the ordering
department therefore they
cannot follow up on late
deliveries from suppliers.
Since time is of essence,
these late deliveries may
lead to production
problems.
and flag orders that are matched to orders and
delayed for follow up. flagged as complete.
Review the file of
Ordering department unfulfilled purchase orders
for any overdue items and
should maintain a list of
discuss their status with
unfulfilled orders for follow
an ordering clerk.
up and action.

Currently the website is The website should be Test data could be used to
not integrated into updated to include an attempt to process orders
inventory system interface into the inventory via the website for items
therefore inventory levels system; this should check which are not currently
are not checked at the inventory levels and only held in inventory. The
time when individual process orders if orders should be flagged
adequate inventory is as being out of stock.
orders are placed.
held. If inventory is out of
stock, this should appear
This can result in Beats on the website.
accepting customer
orders when they do not
have the goods in
inventory. This can cause
them to lose sales and
customer goodwill.
Sales discounts are Any sales discounts Review the sales discount
decided by Beats’s sales should be authorised by report for evidence of
team. sales managers or the review by the sales
sales director and should director.
In order to boost their be set up in the customer
sales, members of the master file so that it can be Use test data to process a
sales team may set the automatically picked up by fake sales invoice from a
discounts too high, the system when an customer entitled to a
leading to loss of revenue. invoice is generated. discount and ensure that
the discount is
Regular review of sales automatically entered by
discount levels should be the system.
undertaken by the sales
director, and this review
should be evidenced.
For goods despatched by Beats should remind all Select a sample of
local couriers, customer local couriers that despatches by couriers
signatures are not always customer signatures must and confirm they have
obtained. be obtained as proof of been signed by the
despatch and payment will

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This can lead to
customers falsely claiming
that they have not
received their goods.
Beats would not be able to
prove that they had in fact
despatched the goods and
may result in goods being
despatched twice. This
may also lead to
misappropriation of goods
and loss of customer
goodwill.
There have been a
number of situations
where the sales orders
have not been fulfilled in a
timely manner.
This can lead to a loss of
customer goodwill and if it
persists will damage the
reputation of Beats.
not be made for any customers as proof of
despatches with missing goods being delivered.
signatures.
Once goods are Review the report of
despatched, they should outstanding sales orders.
be matched to sales Discuss with a responsible
orders and flagged as official to confirm that
fulfilled. follow up procedures on
late deliveries.
The system should
automatically flag any Obtain a sample of system
outstanding sales orders generated reports for
past a predetermined outstanding sales orders
period, such as five days. and confirm that they have
This report should be been reviewed and signed
reviewed by a responsible by a responsible official.
official.