Question

Claire Billiot, the office manager of a local office supply company, is designing its internal control system. Billiot proposes the following procedures for credit checks on new customers, sales on account, cash collections, and write-offs of uncollectible receivables:
a. The Credit Department runs a credit check on all customers who apply for credit. When an account proves uncollectible, the Credit Department authorizes the write-off of the account receivable.
b. Cash receipts come into the Credit Department, which separates the cash received from the customer remittance slips. The Credit Department lists all cash receipts by customer name and amount of cash received.
c. The cash goes to the treasurer for deposit in the bank. The remittance slips go to the Accounting Department for recording of the collections.
d. The controller compares the daily deposit slip to the total amount of the collections recorded. Both amounts must agree.
For each of the four procedures, indicate whether the procedure includes an internal control weakness. Explain how employee fraud could occur because of the weakness. What can Claire do to strengthen the internal control system?


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  • CreatedJuly 08, 2015
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