Auditing and assurance 10-28

Appliances repair and service company bills all cutomers rather than collecting in cash when services are provided. all mail is opened by Tom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is in the office daily. Therefore, he can solve problems and respond to customer's needs quickly. Upon receipt of cash, he immediately prepares a listing to enter the financial transactions in the computerized accounting records. He also contacts customers about uncollected accounts receivable. Because he is so knowledgeable about the business and each customer, he grants credit, authorizes all sales allowances, and charges off uncollectible accounts. The owner is extremely pleased with the efficiency of the company. He can run the business without spending much time there because of Gyders' effectiveness. Imagine the owners suprise when he discovers that Gyders has commited a major theft of the company cash receipts. He did so by not recording sales, recording improper credits to recorded accounts receivable, and overstating receivable.

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A) what weakness in the company's processes might have permitted the fraud?

B) What suggestions do you have for changing the process to reduce the future potential for fraud?