Q:Question:Case 1-309 Lucas Adams, a junior auditor for Adams and Company, was assigned the responsibility of conducting a preliminary application review of a client bank's loan department operations. Lucas was asked to check how the procedure is with the collateral received on loans. Collateral can be anything of value acceptable to the bank but is typically some type of security. Lucas found that customers turn over any collateral to their loan officer, who prepares and signs the next in sequence in a prenumbered four-part form that describes the collateral and serves as a receipt. The customer receives the original of the collateral receipt form. The second copy of the form is sent directly to the collateral records clerk, who logs it in. The loan officer takes the third copy to the vault custodian along with the collateral. The final copy is cancelled and discarded. The vault custodian compares the third copy of the receipt with the collateral in the loan officer's presence. If they agree, the vault custodian signs the third copy. The vault custodian then attaches a tag to the collateral and carries it and the third copy of the collateral receipt to the vault attendant. The vault attendant also compares the description on the third copy with the tagged collateral. If they match, the vault attendant opens the vault and jointly with the vault custodian deposits the collateral within. The vault attendant notes the location on the third copy and signs it. The Completed third copy is then taken by the vault attendant to the collateral clerk. copy, filed alphabetically in a suspense file as a reminder for follow-up purposes. On receiving the third copy from the vault attendant, the collateral clerk compares it to the second copy previously received directly from the loan officer. If the third and second copies match, the collateral clerk completes the entry in the collateral register in alphabetical order. The second copy and the third copy of the collateral receipt are placed in a permanent file by name. Any differences are resolved with the loan officer's assistance. List of procedures Customer: 1. brings in collateral to loan officer 2. receives receipt for collateral Loan Officer: 3. receives collateral from customer 4. removes prenumbered four-part form from file 5. completes form describing collateral and signs it 6. gives original to customer 7. sends second copy to collateral check 8. takes third copy to vault custodian 9. cancels and discards fourth copy 10. takes collateral in sealed bag to vault custodian /r/n 11. receives third copy of collateral receipt from loan officer 12. receives collateral from loan officer 13. reads description and instructions regarding collateral on third copy 14. compares collateral with third copy 15. signs third copy 16. gives third copy to vault attendant 17. opens vault jointly with the vault attendant 18. deposits collateral in vault Vault Attendant: 19. receives third copy from vault custodian 20. compares third copy to collateral being deposited 21. assists vault custodian in opening vault 22. signs third copy upon witnessing deposit of collateral 23. takes third copy to collateral clerk Collateral Clerk: 24. receives duplicate from loan officer 25. makes entry in numerical sequence in logbook 26. holds second copy until later receipt of third copy 27. matches third copy to duplicate and notes appropriate signatures 28. records deposits of collateral in collateral register 29. files collateral receipt copies in permanent file Required: Prepare a flowchart of the collateral receipt process and cross-reference it to the list of procedures provided. Prepare an application controls matrix for the process using the attached form. Cross-reference the controls to the matrix using the appropriate numbers from the list of procedures. Identify any apparent weaknesses noted in the description of the process.