Question

A new audit client of yours processes its sales and cash receipts documents in the following manner:
a. Cash receipts. The mail is opened each morning by a mail clerk in the sales department. The mail clerk prepares a remittance advice (showing customer and amount paid) if one is not received. The checks and remittance advices are then forwarded to the sales department supervisor, who reviews each check and for-wards the checks and remittance advices to the accounting department supervisor. The accounting department supervisor, who also functions as the credit manager, reviews all checks for payments of past due accounts and then forwards the checks and remittance advices to the accounts receivable clerk, who arranges the advices in alphabetical order. The remittance advices are posted directly to the accounts receivable ledger. The checks are endorsed by stamp and totaled. The total is posted to the cash receipts journal. The remittance advices are filed chronologically. After receiving the cash from the preceding day’s cash sales, the accounts receivable clerk prepares the daily deposit slip in triplicate. The third copy of the deposit slip is filed by date, and the second copy and the original accompany the bank deposit.
b. Sales. Salesclerks prepare the sales invoices in triplicate. The original and the second copy are presented to the cashier. The third copy is retained by the salesclerk in the sales book. When the sale is for cash, the customer pays the salesclerk, who presents the money to the cashier with the invoice copies. A credit sale is approved by the cashier from an approved credit list after the salesclerk prepares the three- part invoice. After receiving the cash or approved invoice, the cashier validates the original copy of the sales invoice and gives it to the customer. At the end of each day, the cashier recaps the sales and cash received and forwards the cash and the second copy of all sales invoices to the accounts receivable clerk. The accounts receivable clerk balances the cash received with cash sales invoices and prepares a daily sales summary. The credit sales invoices are posted to the accounts receivable ledger, and then all invoices are sent to the inventory control clerk in the sales department for posting to the inventory control ledger. After posting, the inventory control clerk files all invoices numerically. The accounts receivable clerk posts the daily sales summary to the cash receipts journal and sales journal and files the sales sum-maries by date. The cash from cash sales is combined with the cash received on account, and this constitutes the daily bank deposit.
c. Bank deposits. The bank validates the deposit slip and returns the second copy to the accounting department, where it is filed by date by the accounts receivable clerk. Monthly, bank statements are reconciled promptly by the accounting department supervisor and filed by date.

Required
a. Draw a flowchart for the sales and cash receipts application of your client.
b. Identify potential internal control weaknesses in the client’s procedures.



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  • CreatedFebruary 26, 2015
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