Vendor invoices are mailed directly to corporate headquarters and entered by accounts payable personnel when received; this often occurs before the receiving data are transmitted from the branch offices. The final day of the invoice term for payment is entered as the payment due date. This due date must often be calculated by the data entry person using information listed on the invoice.

Once a week, invoices due the following week are printed in chronological entry order on a payment listing, and the corresponding checks are drawn. The checks and the payment listing are sent to the treasurer’s office for signing and mailing to the payee. The check number is printed by the computer and displayed on the check, and the payment listing is validated as the checks are signed.

After the checks are mailed, the payment listing is returned to accounts payable for filing. When there is insufficient cash to pay all the invoices, certain checks and the payment listing are retained by the treasurer until all checks can be paid. When the remaining checks are mailed, the listing is then returned to accounts payable. Often, weekly check mailings include a few checks from the previous week, but rarely are there more than two weekly listings involved.

When accounts payable receives the payment listing back from the treasurer’s office, the expenses are distributed, coded, and posted to the appropriate plant or cost center accounts.

Weekly summary performance reports are processed by accounts payable for each cost center and branch location reflecting all data entry to that point.

Required:

a. Identify and discuss three areas where Lex-steel Corporation may be exposed to fraud or embezzlement due to weaknesses in the procedures described, and recommend improvements to correct these weaknesses.

b. Describe three areas where management information could be distorted due to weaknesses in the procedures, and recommend improvements to correct these weaknesses.

c. Identify three strengths in the procedures described and explain why they are strengths.