P7-5B SpreadMax, Inc.. makes all sales of its spreadsheet software on credit. Cash receipts arrive by mail. Nick Vaughn opens envelopes and separates the checks from the accompany- ing remittance advices. Vaughn forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Vaughn sends the remittance advices, which show the cash received, to the accounting department for entry in the accounts. Vaughn's only other duty is to grant sales allowances to customers. (Recall that at sales allowance decreases the amount receivable.) When he receives a customer check for less than the full amount of the invoice, he records the sales allowance and forwards the docu- ment to the accounting department.

Required You are a new employee of SpreadMax. Inc. Write a memo to the company president identi- fying the internal control weakness in this situation. State how to correct the weakness.