Cash collections on over-the-counter and COD sales are received by the cashier from the

customer of from the delivery service. Upon receiving cash, the cashier stamps the sales

ticket "paid" and files a copy. The only record of COD sales is a copy of the sales ticket,

which is given to the cashier to hold until cash is received from the delivery service.

Mail is opened by the credit manager's secretary, and remittances are given to the credit

manager for review. The credit manager then places the remittances in a tray on the cashier's

desk. At the time of the daily deposit - called the deposit cutoff time - the cashier delivers

the checks and currency to the assistant credit manager, who prepares remittance lists and

the bank deposit, and carries the deposit to the bank. The assistant credit manager also posts

remittances to customer accounts receivable files and verifies allowable cash discounts.

You learn that the credit manager obtains approval to write off uncollectible accounts from

the executive office of Far Distance Co., located in Chicago, and that as of the end of fiscal

year some remittances that were received on various days during the last month are retained

in the credit manager's custody.

Required:

1.

Describe the frauds that might occur under the procedures now in effect for handling cash

collections and remittances.

2.

What procedures would you recommend to improve control over cash collections and

remittances?