In the evaluation of collections, management and write-offs transaction processing and control design in the following information: (a)identify four potential weaknesses. briefly explain the potential misstatement, recommended correction and possible weakness on all four potential weaknesses identified.
The controller, Ms. Amalia, whose secretary runs the software to produce an aged account receivable trial balance by customer, manages collections. A working trial balance is generated at least once a week and more frequently if collections lag. Ms. Amalia makes decision about specific accounts. Menu-driven software permits the Secretary to look up individual customer accounts, to write off invoices or whole accounts, and to generate customer statements for invoices past due by any specified number of days. The software also permits the printing of pre-drafted letters to the customers to accompany any of these actions. It is normal practice for Ms. Amalia to consider write-offs only once at the end of the month. Marco’s Inc. general policy is to write off any invoice exceeding six months from the time of sale. However, Ms. Amalia is authorized to make all final write-off decisions. The bookkeeper credits the allowance account if write-offs are subsequently collected. The accounts receivable subsidiary ledger is reconciled to the general ledger monthly.
Once each month, another software routine is used to add interest to customers’ accounts equal to 1% of all invoices past due by 30 or more days. This routine also lists the interest charges by invoice by account in an interest journal, summarizes transactions for the month, and posts the total to the interest revenue and accounts receivable accounts in the general ledger.
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