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Identify five control weaknesses within AHLs order receipt, processing, and shipping process as well as specify the corresponding control objectives impacted.

Case Information:

• Historically, AHLs sales are highest during February and March, and from August to October. When a customer order is received, by phone, email, or through the website, the Customer Service Clerk (CSC) receiving the order, checks that AHL has the items in stock and the correct price by checking an online database of inventory on hand. If available, the CSC sends an order confirmation to the customer either via email or phone, including both quantity and price. The CSC then prepares a sales invoice and sends a copy to the customer. AHLs policy is for the sales invoice to show a shipping date of one day from the order date. The clerk then walks to the adjacent warehouse, selects the ordered items, and walks them to shipping.
• AHL has a shipping staff of four people, and the shipping department will not ship any goods without a sales invoice initialled by the CSC. If the sales invoice does not indicate who is to pay for the shipping costs, then AHL sends the goods FOB shipping point. When a shipment is delivered to an incorrect address it is the CSCs job to contact the customer and obtain the correct information.
• If the account is unpaid after the due date (30 days), the receptionist mails a reminder invoice to the customer. Accounts receivable consist of a large number of small dollar value accounts, with the exception of five large chain store customers that account for approximately 40% of the total accounts receivable. The allowance for returns typically has been 1% of the fourth-quarter sales.
• During the year, management negotiated an operating line of credit with a new financial institution. The amount authorized is limited to 75% of accounts receivable under 90 days old and 50% of inventory, to a maximum of $2 million. The loan bears interest at prime plus 3%. Under this agreement, AHL is required audited financial statements within 90 days of its fiscal year-end.

Types of Control Objectives: General Categories of Misstatements Control Objectives = Invalid transactions are recorded = Validity = Valid transactions are omitted = Completeness = Unauthorized transactions are executed = Authorization = Transaction amounts are inaccurate = Accuracy = Transactions are classified incorrectly = Classification = Transactions are recorded in incorrect period = Proper Period

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