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Cash Receipt Systems Customers send checks and remittance advices by mail. Mail volume is typically high requiring a mail room staff of 35 clerks and

Cash Receipt Systems

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 (the mail room 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 (the AR department 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 (the cash receipt department clerk) prepares a deposit slip and sends it along with the checks to the bank.

Required:

Part I: After evaluating the cash receipts system described above, please assess risks in the current system configuration if there is any. In your assessment, please name and describe each risk identified and specify threats each of them poses.

Part II: After identified risks, please recommend control activities to reduce or eliminate threats from each risk. When you describe your control activities, please name and elaborate how they mitigate for each risk.

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