A description of some of the operating procedures of the Greystone Manufacturing Corporation is given in the succeeding paragraphs:

1. When materials are ordered, a duplicate of the purchase order is sent to the receiving department. When the materials are received, the receiving clerk records the receipt on the copy of the order, which is then sent to the accounting department to support the entry to Accounts Payable and to Purchases. The materials are then taken to stores where the quantity is entered on bin records.

2. Timecards of employees are sent to a data processing department which prepares punched cards for use in the preparation of payrolls, payroll checks, and labor cost distribution records. The payroll checks are compared with the payrolls and signed by an official of the company who returns them to the supervisor of the data processing department for distribution to employees.

3. A sales branch of the company has an office force consisting of the manager and two assistants. The branch has a local bank account in which it deposits cash receipts. Checks drawn on this account require the manager's signature or the signature of the treasurer of the company. Bank statements and paid checks are returned by the bank to the manager, who retains them in his files after making the reconciliation. Reports of disbursements are prepared by the manager and submitted to the home office on scheduled dates.

Required:

For each of the activities described, you are to point out

a. The deficiencies, if any, in internal control, including an explanation of the errors or irregularities which might occur.

b. Recommendations for changes in procedures which would correct the existing weaknesses.