Spadina Laboratories provides laboratory testing for samples that veterinarians send in. All work is performed on account, with regular monthly billing to participating veterinarians. Te Xi Huang, accountant for Spadina Laboratories, receives and opens the mail. Company procedure requires him to separate customer cheques from the remittance slips, which list the amounts he posts as credits to customer accounts receivable in the subsidiary ledger. Huang deposits the cheques in the bank. He computes each day's total amount posted to customer accounts and makes sure that this total agrees with the bank deposit slip. This is intended to ensure that all receipts are deposited in the bank. Huang does all customer credit checks, authorizes customer credit limits, and deals with all customer inquiries.
Required
As the auditor of Spadina Laboratories, write a memo to the owners evaluating the company's internal controls over accounts receivable. If the system is effective, identify its strong features. If the system has flaws, propose a way to strengthen the controls.