The following deficiency were included in the accounting records of Z Inc.:

1. The amount of a check in the cash disbursements journal is recorded as $3,527.42 instead of $5,327.42

2. Acquisitions of goods are often not recorded until several weeks after the goods are received because receiving personnel fail to forward receiving reports to the accounts department. When pressure from a vendor’s credit department is put on Z Inc.’s accounting department, it searches for the receiving report, records the transactions in the acquisitions journal, and pays the bill.

3. The payroll clerk prepares a check to a nonexistent person every week when he enters payroll transactions in the computer system, which also records the amount in the payroll journal. He submits it along with all other payroll checks. When the checks are returned to him for distribution, he takes the check and deposits it in a special bank account bearing the person’s name.

4. Credit sales are made to customers with unsatisfactory credit ratings.

5. The accounting department employs one bookkeeper, who receives and opens all incoming mail. This bookkeeper is also responsible for depositing receipts, filing remittance advices on a daily basis, recording receipts in the cash receipts journal. You suspect that a lapping scheme exists.

Required:

a. Recommend a control to address each of these deficiencies.

b. Describe a TEST OF CONTROL the external auditors would perform to assess if each of these controls, if implemented, is operating effectively.

c. Describe a substantive procedure to detect each of the deficiency.