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Help! internal contol question - weedfleet - 05-18-2010

Hi there, Im currently enrolled in an accounting class and stuck on this question.. could anyone help?

Truly Fresh Bakery makes all sales of its bread to retailers on account. Cash receipts arrive by mail, usually within 30 days of the sale. Gary Donell opens envelops and separates the cheques from the accompanying remittance advices. Donell forwards the cheques to another employee, who makes the daily bank deposit but has no access to the accounting records. Donell sends the remittance advices, which show the amount of cash received, to the accounting department for entry in the accounts. Donell's only other duty is to grant sales allowances to customers. When he receives a customer cheque for less than the full amount of the invoice, he records the sales allowance and forwards the document to accounting department.

REQUIRED Identify the internal control weakness in this situation. State how to correct the weakness.

- Toronto_Boy - 05-20-2010

Receiving cheques/cash in mail and granting sales allowance are incompatible duties. Two seperate persons should perform these.

Read about segregation of duties.