P5-72B. (Learning Objective 2: Identifying internal control weakness in sales and cash receipts)

Glowing Skin Care makes all sales on credit. Cash receipts arrive by mail, usually within 30 days of the sale. Emily Nolan opens envelopes and separates the checks from the accompanying remittance advices. Nolan forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Nolan sends the remittance advices, which show the amount of cash received, to the accounting department for entry in the accounts receivable. Nolan’s only other duty is to grant allowances to customers. (An allowance decreases the amount that the customer must pay.) When Nolan receives a customer check for less than the full amount of the invoice, she records the allowance in the accounting records and forwards the document to the accounting department.

Requirement 1. You are a new employee of Glowing Skin Care. Write a memo to the company president identifying the internal control weakness in this situation. State how to correct the weakness.