Communication Actitivy Essay

As a new attendee for the CPA firm of Croix, Marais, and Kale, you have been assigned to review the inherent controls over mail interchange return of Manhattan community. Your review reviews the following run acrosss ar promptly endorsed For Deposits further, but no harken of the checks is ready by the individual opening the mail. The mail is opened either by the narrator or by the employee who maintains the accounts due magnetic discs. Mail receipts argon deposited in the bank weekly by the cashier. Instructions Write a letter to Jerry Mays, owner of the Manhattan company explaining the weaknesses in internal control and your pep upations for improving the system. Mr. Jerry MaysManhattan CompanyDear Mr. MaysRE INDENTIFICATION OF WEAKNESSES IN INTERNAL CONTROLSAs your newly appointed auditors, Croix, Marais, and Kale (CMK or we) are mandated by the screen background of our contract to review the internal controls over mail cash receipts (the move) of Manhattan Compan y (the Company). As element of the review, we will also provide some commendations for improving any identified weaknesses in the internal control system of the Company. The review of the process identified the following, which we will classify as weaknesses in the internal control of the system* Although checks are promptly endorsed For Deposit Only, no list of the checks is prepared by the person opening the mail * Mail is opened by the cashier or by the employee who maintains the accounts receivable records and * Mail receipts are deposited in the bank weekly by the cashier For to each one of the aforementioned, we will provide an explanation of the weakness as substantially as our barrackations for improvement. The checks endorsed, as For Deposit Only is a very good internal control mechanism. The endorsement is restrictive and reduces the likelihood that someone could cavort the check for personal use, as banks will not give individual cash when presented with a check tha t has this type of endorsement. However, a weakness of the process lies in the fact that no duplicate of the list of the checks that are received is prepared by the person opening the mail.This is an example of a document procedure fracture in the process and aninternal control weakness. Without the preparation of a duplicate list as well as signing for the receipt of the checks, there is no trace that the event of receipt of the checks has occurred. By requiring signatures and preparing a duplicate list of the checks, the Company can identify the individual responsible for the event. To this internal control weakness, we would recommend the establishment of responsibility, where only a designated person a mail receipt clerk will be authorized to handle checks received via mail. The mail receipt clerk should prepare in duplicate, a list of the checks received each day and sign the list to establish responsibility for the receipt of the data. As part of the process, the original co py of the list, along with the checks should be sent to the cashiers department for the preparation of the everyday cash summary.Additionally, the mail receipt clerk should send a copy of the list to the treasurers office, if there is one for reconciliation purposes with the everyday cash summary. As mentioned above, we observed that the mail is opened by the cashier or by the employee who maintains the accounts receivable records. This is a flaw in the internal control of the process related to the segregation of duties or separation of function. The cashiers office is responsible for the preparation of the daily cash summary and therefrom should not be the same person opening the mail of cash receipts, which is a related activity. Different individuals should be responsible for any related activity. A dishonest cashier can understate the recording of the mail cash receipts and report a unalike heart and soul on the daily cash summary for personal benefits. Accordingly, we wou ld recommend the establishment of responsibility, where only a designated person a mail receipt clerk will be authorized to handle checks received via mail.Additionally, we recommend the segregation of duties, where different individuals receive the mail cash, record the receipts and hold the cash. This will ensure that different individuals are responsible for any related activity and that the responsibility for record keeping for the cash is offend from the physical custody of the cash. Finally, we also observed that the cashier deposits mail receipts in the bank weekly. The internal storage of cash on the premises of the Company is not advisable for obvious reasons- theft, robbery, and unauthorized access. Employees with different intentions can alert external cohorts to raid or rob the Company at night or at another period to gain access to the cash stored onthe premises.Additionally, the storage of the cash on the premises presents a working hazard for the employees as outs iders wanting to gain access to the cash whitethorn subject them to unwanted raids. The use of a bank on a daily basis contributes significantly to good internal control over cash. The company can safeguard the cash on a daily basis by using a bank as a depository and thus minimizing the amount of currency that the Company has on hand at any point in time during the week. Additionally, the use of the bank on the daily basis facilitates the control of cash because it creates a double record of all bank transactions one by the Company and one by the bank.Also we recommend that all receipts be deposited in the bank on a daily basis versus the online practice of weekly deposits. In summary, if management implements the above recommendations, the Company will be in a better position to safeguard its assets from employee theft, robbery, and unauthorized use. Additionally, the companys accountancy records will be heighten in its accuracy and reliability as a result of the reduction in the risk of errors and irregularities. We are available to further discuss with Company management and hope that the recommendations will be implemented as soon as practicable. We look forward to working with management on this initiative.ReferenceWeygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial accounting 2010 custom edition (6th ed.). Hoboken, NJ John Wiley & Sons.