You are the auditor of Spalding sportswear ltd. (Spalding) and have made the following notes on Spaldings cash receipts procedures.

(1) cheque are received by mail and from sales representatives, who may obtain cheques directly from customers during their visits.

(2) all received cheques are forwarded to the credit-control clerk in the sales order department, who puts a red line through every cheque received. The credit control clerk then enters details of the cheques into the cash receipts journal and ages the receipt from the remittance advice details provided by the customer.

(3) After all cheques have been recorded, the credit control clerk prints the daily cash receipts report. The report details all cheques recorded into the cash receipts journal clerk agrees all cheques to this report, prepares a bank deposit slip and bank the cheques.

(4) At end of each day, the accounts receivable ledger is updated with cash receipts data.

Compute the following:

Identify and explain three weaknesses in Spaldings cash receipts procedures.

Explain an appropriate test of control for the three-weakness noted above.

In the audit of a small sized business would the auditor test internal controls?

Explain why each of the three factors would lead to a decrease in preliminary overall materiality.