Question

Refer to the system flowchart and identify the internal control risks represented in it:

Mail Room Clerk 1 Mail Room Clerk 2 Accounts Receivable Department Remittance Advice Check Remittance Advice Check Check Remittance List Remittance Advice AR Sub Ledger Open Mail and Reconcile Remit advice and Check Prepare Remittance List Distribute RA and Checks Reconcile, Record in Journal, and Accounts, Deposit Cash Cash Receipts Journal Remittance Advice Check Remittance List AR Control GL Cash Check Remittance List Remittance Advice Deposit Slip Check Remittance Advice Remittance List BANK

Answer 1

As Identified Internal Process is Divided into 3 stages.

There is different  Departments that are Mail Room Clerk 1, Mail Room Clerk2 and Accounts Receivable Department. when any mail is received , then open and Reconcile and advice for that . if any lack in mail then Proceeds and Identify Issues otherwise Complete all the process and move towards for next Mail Clerk 2 .

In the next stage firstly Checking Procedure will be done. then Prepare Remittance list , Distribute RA Checks . If Remiitance list is Correct and Verified it means the process is completed. if lists are not prepared then go for again check Remittance list and assist them for advice that the process is not Completed.

after this all process is completed then at last Accounts Receivable Department will Complete the Remaining Process. Same 3 Stages of Check, Remittance list, Remittance Advice will Followed . then start the process of Financial Statement procedures for recording transactions in the Books of Account. that are Record in Journal, Accounts and Deposit cash. now as we examine the Journal and Accounts preparation are Internal work of an Organisation. but Deposit cash is outside as We have to deposit cash in the Bank. so for depositing cash Go to bank and Bank Receipt or slip should be maintain in the Books. if entry entered in the Books of Account. then process will complete.

after journal , Accounts and Deposit cash as there is creation of further books ; Ledger, Cash Receipts Journal and AR Control GL cash. This process is an ongoing process till the Financial year does not end. when the financial year ended then prepartion of Income Statement and Balance sheet.

After this Internal Control Following are the Identified Risks :

Limited Segregation of Duties

Preventive controls like Signatures etc, that which employee will be responsible for Mistakes.