Burbage Limited

Burbage Limited is a trading company selling a range of bought-in goods on

credit. You have discussed the system with Mr Moscar, the chief accountant and
Mrs Houndkirk, the data-processing manager, who have provided you with
narrative description and flowcharts illustrating the sales and debtors routine:
The numbers in square brackets in the Case are references to the flowchart in
Figure 9.4.
Sales orders are received daily from customers via salespersons who forward
them to the sales order department. The sales order clerks use a terminal with a
'read only' facility to determine inventory availability and then prepare a sales
order with the following data:
(a) Customer name, address and reference/ account number (used for updating
the sales ledger).
(b) Product name and code (used for updating inventory records).
(c) Quantity required and price.
(d) Sales code (used for analysing sales).
Sales orders are initialled by sales order clerks and sent to the computer
department for processing. Customer numbers and product codes are computergenerated under the control of MrsHoundkirk; they contain check digits in each
case. New customers are allocated a number from a list held by the sales order
clerk. [1 ]

Computer department staff are Mrs Houndkirk (a trained systems analyst and
programmer), an assistant programmer (acting at peak times as operator) and
two operators (both are attending programming courses at a local college).A
reputable software house supplied the computer software but it was
subsequently modified by the computer department staff in conjunction with
the software house and the computer manufacturer, following informal
discussions with staff involved in the system. Documented test results
following modification of software are held by Mrs Houndkirk. Only computer
department staff members are allowed to enter the computer room. [2]
On receipt of the sales orders the operator produces a quantities hash total
and document count that he/she enters on a control sheet. [3]
Daily the operator loads the sales ledger and inventory record files held on a
fixed disk, types in transaction details from the sales orders on the computer
keyboard and the computer updates the sales ledger and inventory records on
the disk. The following are printed output: (a) Sales despatch listing; (b) Sales
invoice listing (day book); (c) Sales invoices (two copies); (d) Sales despatch
notes (two copies); (e) Updated inventory record listing. At the month-end the
operator enters an additional instruction and the computer prints an
outstanding trade receivables listing showing total of balances and, for each

customer, uncleared invoices (open items) and the total of those invoices.
Receipts from customers are input separately. [4]
Mrs Houndkirk is very security conscious and daily the hard disk files are
dumped on to a back-up disk held in the file library next to the computer
room. Mrs Houndkirk operates a grandfather-father-son system for the disks
that contain header and trailer labels and are also identified manually.
Burbage Limited has no file librarian but computer department staff have been
instructed to sign and enter date and time in the library control book when
files are moved. [5]
After the daily run the operator compares the control totals on the sales
invoice and despatch listings with the control sheet totals and takes corrective
action if there is a lack of agreement. The operator also takes corrective action
on items in the exception report. (Typical exceptions are non existent
customer numbers and inventory codes, customer credit limit exceeded,
orders exceeding pre-determined values.) [6]
Documents and listings are distributed as follows:
(a) Despatch notes and sales despatch listing to despatch department as
authority to despatch, one copy of the despatch note being sent to the
customer with the goods and the other held in despatch.
(b) Sales invoices (both copies), sales invoice listing and original sales orders
to sales order clerks who compare sales orders with the listing and invoices.
The customer receives a copy of the invoice.
(c) The monthly list of trade receivable balances is sent to the accounts
department for comparison with the sales ledger control account in the
general ledger.
(d) The daily inventory records listing is sent to the inventory control
department where it is used as the basis for ordering inventory. (Monthly,
warehouse staff count inventory and send details of inventory on hand to
inventory control where they are compared with the month-end inventory
records listing.) [7]
If sales order clerks find differences between the sales orders and sales
orders/sales order listing, the invoice is amended by hand and both copies
sent back to the computer room for correction during the next run. The sales
invoice listing (containing details of individual invoices in customer number
order and a summary of individual sales code allocations) and remaining
second copies of the sales invoices are then sent (the sales invoice listing
amended appropriately by hand) to the accounts department. Here it is used
to update sales ledger control account in the general ledger and to post
individual sales accounts. [8]
Required
Analyse the Burbage Limited sales order processing system and identify areas
of significant weakness in internal control and suggest steps the company
should take to rectify any weaknesses. Your answer should be framed under
the following headings (we covered development, organizational and security
controls for this company in Figure 8.5).
application controls
(a) input

(b) processing
(c) output
other matters