Rocky Productions makes all sales on credit. Cash receipts arrive by mail. Luke Chipello, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advices. Chipello forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records, Chipello sends the remittance advices, which show cash received, to the accounting department for entry in the accounts, Chipello's only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer's account receivable.) When Chipollo receives a customer check for $500 less a $35 allowance, he records the sales allowance and forwards the document to the accounting department Read the requirements Requirement 1. Identify the internal control weakness in this situation Requirement 2. Who should record sales allowances? The sales allowances should be recorded by (2) - Requirement 3. What is the amount that should be shown in the ledger for cash receipts? The amount that should be shown in the ledger for cash receipts is S . 6: Requirements 1. Identify the internal control weakness in this situation. 2. Who should record sales allowances? 3. What is the amount that should be shown in the ledger for cash receipts? Chipello should have unlimited access to the accounting records. The job of receiving customers payments is performed by the same person who is res ccounting for sales allowances. The same person should prepare the deposit and record the entry in the accounts. The same person should receive the checks, prepare the deposit and record the entry in the accounts O O O a person who does not have access to the cash receipts Luke Chipello because he grants the sales allowance the cashier who makes the daily deposit O A security guard should be hired. O Purchase orders, utilizing authority from operations, should be used to authorize inventory purchases Require that payments for merchandise be signed by the person who verified receipt of the merchandise The accountant should not place the purchase order. The accountant should receive the receipt of goods and purchase order forms from other departments before issuing payment. The receipt of goods should be verified by someone other than the accountant or the person authorizing the purchase order. (5) O A security guard should be hired. O Purchase orders, utilizing authority from operations, should be used to authorize inventory purchases O Require that payments for merchandise be signed by the person who verified receipt of the merchandise The accountant should not place the purchase order. The accountant should receive the receipt of goods and purchase order forms from other departments before issuing payment. The receipt of goods should be verified by someone other than the accountant or the person authorizing th purchase order. O O A security guard should be hired. O Purchase orders, utilizing authority from operations, should be used to authorize inventory purchases. Require that payments for merchandise be signed by the person who verified receipt of the merchandise. The accountant should not place the purchase order. The accountant should receive the receipt of goods and purchase order forms from other departments before issuing payment. The receipt of goods should be verified by someone other than the accountant or the person authorizing purchase order
