Appliances Repair and Service Company bills all customers rather than collecting in cash when services are provided. All mail is opened by Tom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is in the office daily. Therefore, he can solve problems and respond to customers’ needs quickly. Cash is deposited daily. Gyders. uses the listing to enter the financial transactions in the franklyn computerized accounting records. He also contacts customers about uncollected accounts receivable. Because he is so knowledgeable about the business and each customer, he grants credit, authorizes all sales allowances, and charges off uncollectible accounts. The owner is extremely pleased with the efficiency of the company. He can run the business without spending much time there because of Gyders’ effectiveness. Imagine the owner’s surprise when he discovers that Gydes has committed a major theft of the company’s cash receipts. He did so by not recording sales, recording improper credits to recorded accounts receivable, and overstating receivables. REQUIRED: Given that cash was prelisted, went only to the treasurer, and was deposited daily, what internal control deficiency permitted the fraud? What are the benefits of a prelisting of cash? Who should prepare the prelisting and what duties should that person not perform? Assume that an appropriate person, as discussed in part b, prepares a prelisting of cash. What is to prevent that person from taking the cash after it is prelisted but before it is deposited? Who should deposit the cash, given your answer to part b?

Pkg Acc Infor Systems MS VISIO CD

10th Edition

ISBN:9781133935940

Author:Ulric J. Gelinas

Publisher:Ulric J. Gelinas

Chapter11: The Billing/accounts Receivable/cash receipts (b/ar/cr) Process

Section: Chapter Questions

Problem 2SP

See similar textbooks

Related questions

Question

Appliances Repair and Service Company bills all customers rather than collecting in cash when services are provided. All mail is opened by Tom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is in the office daily. Therefore, he can solve problems and respond to customers’ needs quickly.

Cash is deposited daily. Gyders. uses the listing to enter the financial transactions in the franklyn computerized accounting records. He also contacts customers about uncollected accounts receivable. Because he is so knowledgeable about the business and each customer, he grants credit, authorizes all sales allowances, and charges off uncollectible accounts. The owner is extremely pleased with the efficiency of the company. He can run the business without spending much time there because of Gyders’ effectiveness.

Imagine the owner’s surprise when he discovers that Gydes has committed a major theft of the company’s cash receipts. He did so by not recording sales, recording improper credits to recorded accounts receivable, and overstating receivables.

REQUIRED:

Given that cash was prelisted, went only to the treasurer, and was deposited daily, what internal control deficiency permitted the fraud?
What are the benefits of a prelisting of cash? Who should prepare the prelisting and what duties should that person not perform?
Assume that an appropriate person, as discussed in part b, prepares a prelisting of cash. What is to prevent that person from taking the cash after it is prelisted but before it is deposited?
Who should deposit the cash, given your answer to part b?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions