Cash receipt procedures and system at Emporia Corporation

Customers send checks and remittance advices by mail. Mail volume is typically high requiring a mail room staff of 35 clerks and one supervisor. The clerks share equally in the task of sorting the mail and directing it to the appropriate recipient. In the case of cash receipts the clerks open the envelopes to verify that the checks are signed and are constant in amount with the remittance advice. The checks and remittance advices are collected into batches and sent to the AR department, where the AR clerk reviews them for correctness, posts to the AR-Sub ledger. The clerk then prepares two copies of a remittance list. One of these is filed in the department along with the remittance advice and the other is sent to the cash receipts department with the checks. Finally the clerk summarizes the batch of cash receipts transaction and post to the general ledger AR-Control account and the Cash account. Upon receipt of the checks and remittance list, the Cash Receipts clerk reconciles the documents and post the checks to the Cash Receipts journal. At the end of the day, the clerk prepares a deposit slip and sends it along with the checks to the bank.

Part I:Create a system flowchart of the cash receipts procedures described above.

Part II:Describe the risks, if any, which are inherent in the current system configuration.

Part III:Describe the controls, if any, that are needed to reduce or eliminate the risks identified in Part II.