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Refer to the system flowchart below and identify the internal control risks represented in it:

Refer to the system flowchart below and identify the internal control risks represented in it:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Refer to the system flowchart below and identify the internal control risks represented in it:

 

# Accounts Receivable Process Flowchart This flowchart outlines the process for handling remittance advice and checks within the mail room and accounts receivable department of an organization. ### Mail Room Clerk 1: 1. **Open Mail and Reconcile Remit Advice and Check:** - Process begins with receiving remittance advice and checks. 2. **Remit advice and Check Processing:** - Checks and remittance advice are reconciled. - Output includes separate remittance advice and checks forwarded for further processing. ### Mail Room Clerk 2: 1. **Prepare Remittance List, Distribute RA and Checks:** - Remittance list is prepared. - Distributes remittance advice (RA) and checks accordingly. ### Accounts Receivable Department: 1. **Reconcile, Record in Journal, and Accounts, Deposit Cash:** - Receives check, remittance list, and advice. - Reconciliation process is completed, and the cash is recorded in the journal and accounts. 2. **Financial Entries:** - Updates are made to the AR Sub Ledger, Cash Receipts Journal, and AR Control GL Cash systems. 3. **Check Deposit:** - A deposit slip is prepared. - Check is sent to the bank for deposit. ### Key Components Illustrated: - **Flow Elements:** - The arrows indicate the direction of the workflow from one process to another. - **Documents and Outputs:** - Documents include remittance advice, checks, and remittance lists. - Outputs consist of deposit slips and financial journal entries. - **Storage and Ledger Updates:** - Represents the integration with accounting records such as sub-ledgers and journals. This structured approach ensures efficient processing and accurate financial record-keeping.
Transcribed Image Text:# Accounts Receivable Process Flowchart This flowchart outlines the process for handling remittance advice and checks within the mail room and accounts receivable department of an organization. ### Mail Room Clerk 1: 1. **Open Mail and Reconcile Remit Advice and Check:** - Process begins with receiving remittance advice and checks. 2. **Remit advice and Check Processing:** - Checks and remittance advice are reconciled. - Output includes separate remittance advice and checks forwarded for further processing. ### Mail Room Clerk 2: 1. **Prepare Remittance List, Distribute RA and Checks:** - Remittance list is prepared. - Distributes remittance advice (RA) and checks accordingly. ### Accounts Receivable Department: 1. **Reconcile, Record in Journal, and Accounts, Deposit Cash:** - Receives check, remittance list, and advice. - Reconciliation process is completed, and the cash is recorded in the journal and accounts. 2. **Financial Entries:** - Updates are made to the AR Sub Ledger, Cash Receipts Journal, and AR Control GL Cash systems. 3. **Check Deposit:** - A deposit slip is prepared. - Check is sent to the bank for deposit. ### Key Components Illustrated: - **Flow Elements:** - The arrows indicate the direction of the workflow from one process to another. - **Documents and Outputs:** - Documents include remittance advice, checks, and remittance lists. - Outputs consist of deposit slips and financial journal entries. - **Storage and Ledger Updates:** - Represents the integration with accounting records such as sub-ledgers and journals. This structured approach ensures efficient processing and accurate financial record-keeping.
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