As a new auditor for the CPA firm of Croix, Marais, and Kale, you have been assi

Question

As a new auditor for the CPA firm of Croix, Marais, and Kale, you have been assigned to review the internal controls over mail cash receipts of Manhattan Company. Your review reveals the following: Checks are promptly endorsed “For Deposit Only,” but no list of the checks is prepared by the person opening the mail. The mail is opened either by the cashier or by the employee who maintains the accounts receivable records. Mail receipts are deposited in the bank weekly by the cashier.
Instructions
Write a letter to Jerry Mays, owner of the Manhattan Company, explaining the weaknesses in internal control and your recommendations for improving the system.

Explanation / Answer

Separate the duties, see that one supervisor is involved when the mails  are opened. Let them compile a list of checks and both must sign that it is complete and to the correct value.  The person opening the receipts  must not be the one who is maintaining the records  of deposits of the checks.  Get someone else to do and cross check the bank deposit slips total with the original list for accuracy and completeness.  See   that the person responsible of accounts receivables check this.  Cross check to books of entry, deposit list , bank account, accounts receivables, and customer control must be equal.Also mention that personnel can work together to get around internal control and how would you stop it.

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