Summary of Findings and Audit Implications

•      An analysis of our Flow Chart results shows us the strengths and weaknesses of SDE's order processing. SDE's strengths includes the following: EDI, which improves overall data accessibility and efficiency, a credit check process, which reduces the likelihood of in-collectable receivables, decent separation of duties, which allows easy recognition of who is responsible for what, and a extensive "paper" trail to different departments, which allows each department to double check with one another just in case any discrepancies result. Although SDE does have some strong controls in place, there is still room for improvement. They are as follows: the database for shipping needs to be improved to get rid of problems of vagueness, the credit approval should not be authorized by sales personnel due to conflict of interest, trained personnel should be the only ones authorized to process orders, a more efficient information systems need to be installed in between warehouse and shipping department so that orders can be processed more accurately, and lastly a more efficient accounting system needs to be installed so that accounts can be recorded in a timely manner. If all of the above can be implemented, the risk of material misstatement due to either fraud or error would be significantly reduced.
•      In addition to the Flow Chart Analysis, interviews of key people within the organization reiterate the strengths and weaknesses outlined above. The main strength that the staff mentions primarily is the use of computers and databases which allows fast input and retrieval of information. The weaknesses that the staff mentions reinforces the finding of the flow chart analysis, which is a need for improvement in the credit approval process, a need for improvement in accounting records, and a need for reconciliation in between the warehouse and shipping department on inventory discrepancies.
•      The PR risk map puts all of the above into perspective of what the issues are, what magnitude these issues take, and how likely they are be in existence. The most pertinent issue of all is the inadequate credit authorization process taking place. By getting rid of this risk, it would reinforce the financial integrity of the whole operations by getting rid of excessive defaults, which would simplify the accounting records and ultimately reduce the business risk of being a going concern. The other issue involves improving the information & communication of the operations network so that shipping glitches, and miscommunication between departments can wholly be eliminated.  If these two issues can be resolved, SDE's ordering process will be brought to an optimal level.