At Morris Mart, Inc., all sales are on account. Mary Morris
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At Morris Mart, Inc., all sales are on account. Mary Morris-Manning is responsible for mailing invoices to customers, recording the amt billed, opening mail, and recording the payment. Mary is very devote and never takes off more than 1 or 2 days for a long weekend. Mary sometimes receive personal notes with payments from customers. Another clerk handles all a/p. Mary's brothers, president of the company, has hired an accountant to help with the expansion.
1. List some problems with the current accounts receivable system.
2. What suggestions would you make to improve internal control?
3. How would you explain to Mary that she personally is not the problem?
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Solution Summary
At Morris Mart, Inc., all sales are on account. Mary Morris-Manning is responsible for mailing invoices to customers, recording the amt billed, opening mail, and recording the payment. Mary is very devote and never takes off more than 1 or 2 days for a long weekend. Mary sometimes receive personal notes with payments from customers. Another clerk handles all a/p. Mary's brothers, president of the company, has hired an accountant to help with the expansion.
1. List some problems with the current accounts receivable system.
2. What suggestions would you make to improve internal control?
3. How would you explain to Mary that she personally is not the problem?
Solution Preview
1. List some problems with the current accounts receivable system.
There is absolutely no segregation of duties. This is a very ineffective internal control environment. Mary records the amount billed to customers and mails the invoices, and then opens the mail and records the payment. This is a situation where it would be very easy for her to manipulate records, and pocket incoming money, while still crediting accounts to make it look like the correct amount was paid. ...
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