You are a self-employed consultant who designs and evaluates internal control systems; you recently made a presentation to a local chapter of the Institute of Management Accountants. After the presentation, Barb approached you with some questions. Barb is the accountant for Top Notch T-Shirt Printing, a company that makes custom t-shirts for student clubs, professional organizations and other groups.
The process of producing shirts typically goes like this: (a) Receive an order in person, over the phone or via e-mail. The order includes the number, sizes and color(s) of t-shirts as well as the artwork. (b) Design or adapt the group's name and logo for the t-shirts. (c) Finalize the order with the client and establish the price; receive a 50% deposit from the client. (d) Purchase plain t-shirts. (e) Print the t-shirts. (f) Deliver the printed t-shirts and bill the client for the remaining 50%. (g) Receive the payment due from the client.
Barb has asked your advice on designing internal controls for Top Notch T-Shirt Printing.
a. Prepare a flowchart describing the general process and information flows at Top Notch T-Shirt Printing. (You can use a software if you want)
b. Prepare a Risk/Control Matrix for Top Notch T-Shirt Printing. (Omit the Assertions columns and the checking columns; see example below.) By using the flowchart drawn in a. identify at least five objectives and five risks. Propose at least five specific internal controls that you should recommend to Barb.