(L.OBJ. 7) Identifying internal control weakness in cash receipts [10—15 min]
Two Brother Productions makes all sales on credit. Cash receipts arrive by mail. Nathan Spieler in the mailroom opens envelopes and separates the checks from the accompanying remittance advices. Spicier forwards the checks to another employee, who makes tile daily hank deposit, but has no access to the accounting records. Spicier sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Spieler’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the amount receivable.) When Spieler receives a customer check for $575 less a $70 sales allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
1. Identify the internal control weakness in this situation.
2. Who should record sales allowances?
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