You became the manager of the North Dallas Branch of the Far Wholesale Distributing Companyfour months ago. The branch has grown from about $1 million in annual sales four years ago toabout $4 million in annual sales this year. About one-fourth of these sales are over the counter andCOD (for which the company uses a delivery service). The remainder, to large customers, arebilled and collected locally through an accounts receivable system. You have noticed that, in spiteof the recent increases in sales, cash flow from operations has been declining within the past year.In addition, in spite of the strong economy, write-offs from uncollectible accounts have beenincreasing. After digging a bit into the routine procedures for processing cash receipts, you findthe following:Cash collections on over-the-counter sales and COD sales are received from the customer ordelivery service by the cashier. On receipt of cash, the cashier stamps all sales tickets "paid" andfiles a copy for future reference. The only record of COD sales is a copy of the sales ticket givento the cashier to hold until the cash is received from the delivery service.Mail is opened by the secretary to the credit manager, and all remittances (checks) are given to thecredit manager for her review. The credit manager then places the checks in a tray on the cashier'sdesk. At the end of each day, the cashier delivers the checks and cash on hand from over-the-counter and COD sales to the assistant credit manager, who takes them to the bank. Before doingso, however, the assistant credit manager uses the customer checks as the input documents to postamounts as credits to the accounts receivable ledger. The assistant credit manager also verifiescash discounts allowable.The credit manager approves write-offs of uncollectible accounts. You also learn that the creditmanager often retains in her custody some "questionable checks" that were received on variouscustomer accounts.Required:1. Discuss the internal control system of this company. Point out any weaknesses that you see.2. Discuss whether your observations about internal control might have had any impact on thefinancial statement trends.3. Recommend at least three improvements in the system.