Sellmore, Inc. is a retail department store. To facilitate customer shopping, the store issues credit cards to customers who meet credit standards. These standards are set by the controller, who also grants credit. To encourage sales, credit limits are not imposed until a payment is more than 90 days past due. It is Sellmore's policy to grant a credit card only after a credit check. However, the chief accounts receivable bookkeeper has the authority to waive a credit check if it appears that the delay caused by such a credit check may deter or defer a large sale. In recent years, Sellmore's management has put emphasis on telephone sales. If a customer who does not have a credit card calls in an order with a retail value of more than \(\$ 100\), the telephone operator checks with the department manager from which the merchandise is being ordered. In such instances, the department manager has the authority to grant credit.

Accounts receivable are reviewed every year by the chief accounts receivable bookkeeper. Any accounts more than six months in arrears are written off and the customer's account is discontinued.

Required:

The internal auditor is reviewing the company's procedures for controlling credit and receivables.

a. Identify five deficiencies that exist in Sellmore, Inc.'s credit-granting procedures.

b. Recommend procedures that may be used to overcome the deficiencies mentioned in requirement (1) above.