William Green recently acquired the financial controlling interest of Importers and Wholesalers, Inc., importers and distributors of cutlery. In his review of the duties of employees, Mr. Green became aware of loose practices in the signing of checks and the operation of the petty cash fund.

You have been engaged as the company's CPA, and Mr. Green's first request is that you suggest a system of sound practices for the signing of checks and the operation of the petty cash fund. Mr. Green prefers not to acquire a check-signing machine.

In addition to Mr. Green, who is the company president, the company has twenty employees including four corporate officers. About 200 checks are drawn each month. The petty cash fund has a working balance of about \(\$ 200\) and about \(\$ 500\) is expended by the fund each month.

Required:

Prepare a letter to Mr. Green containing your recommendations for good internal control procedures for

a. Signing checks. (Mr. Green is unwilling to be drawn into routine check signing duties. Assume that you decided to recommend two signatures on each check.)

b. Operation of the petty cash fund. (Where the effect of the control procedure is not evident, give the reason for the procedure.)