Over the year, the Jackson Sports Supplies Company received multiple complaints from customers that there payments were incorrectly posted. While the total amount of payments received equaled the customers’ total payments, the amounts were broken up in multiple entries at different dates. Additionally, the company was experiencing cash-flow problems at the end of the year. Management concluded that they had a problem in the billing and collection process. The Jackson Sports Supplies Company hired you to perform an examination of the billing and collection process to determine any deficiencies that exist in the process.
After studying the billing and collection process, you came up with following conclusions:
1. There is a lack of segregation of duties in the accounts receivable department. There are only two bookkeepers to perform all of the duties in the billing and collection process.
2. The receptionist is assigned to open the incoming mail but regularly just gives the mail to the bookkeepers unopened.
3. The main responsibilities of bookkeeper A are:
Receive payments received by mail
Create a daily remittance list of all payments received
Depositing receipts
4. The main responsibilities of bookkeeper B are:
Recording receipts in the cash receipts journal
Posting the payment in the individual customer’s accounts and the general ledger accounts
5. Additionally, you were told that bookkeeper A is regularly out of the office for business and personal reasons. On these days, bookkeeper B is responsible for performing bookkeeper A’s duties.
6. Since there is a lack of segregation of duties and the company received complaints from customers of errors in their statements, you suspect that the bookkeeper may performing an embezzlement scheme called lapping. Lapping occurs when the bookkeeper conceals the cash shortage by delaying the posting of cash remittances.

Create a list of audit procedures that you should perform in order to decide if lapping exists in Jackson Sports Supply Company.

  • CreatedJanuary 21, 2015
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