The management at Livingston, Inc., recognizes that a well-designed internal control system provides many benefits. Among the benefits are reliable financial records that facilitate decision making and a greater probability of preventing or detecting errors and fraud. Livingstons internal auditing department periodically reviews the companys accounting records to determine the effectiveness of internal controls. In its latest review, the internal audit staff found the following conditions:

1.A decrease in the gross profit percentage was satisfactorily explained.

2.Bad debt write-offs are not prepared and approved by the same employee

3. There are no discrepancies between physical inventory counts and perpetual inventory records.

For each of the conditions detected by the Covington internal audit staff: a. Describe a possible cause of the condition. If the control is satisfactory, indicate as such. b. Recommend actions to be taken and/or controls to be implemented that would correct the condition for control that are deemed not satisfactory.