Following the embezzlement of $50 000 from Easy-Go Pinball Traders, you have been asked to appraise the information system of the business, with particular reference to the internal control procedures. An investigation soon discloses that there is, in fact, no system and internal control is neither understood nor practised.

Many payments are made from cash taken straight from the cash register, and when it is necessary to draw a cheque it may be signed by any one member of the office staff. The bank statement has not been reconciled for several years. The weekly payroll normally amounts to approximately $5000, but last week it was prepared by an accounts clerk, Ian Pilfer. Pilfer wrote out a cheque for $50 000, recorded $5000 on the cheque butt, signed the cheque himself and drove the firm's car to the bank to collect the payroll. The police have been unable to locate Pilfer, the missing money or the vehicle.

Prepare a report for the management of Easy-Go Pinball Traders, making particular reference to:

1. The purpose of the bank reconciliation statement 

2. Deficiencies in the procedures followed by the business with respect to cash 

3. The changes you would recommend to safeguard the firm's liquid assets in the future.