Dottie Martin is the CEO of Martin Industries. She seeks your advice as to how t

ID: 2437148 • Letter: D

Question

Dottie Martin is the CEO of Martin Industries. She seeks your advice as to how to assign the functions among her three clerical employees in order to achieve the highest degree of internal control.

Below are the eight functions performed by these clerks:

Maintains disbursement (payments) journal.

Reconciles bank account.

Prepares checks for signature.

Opens mail and lists receipts.

Deposits cash receipts.

Maintains accounts receivable records.

Determines when accounts receivable are uncollectible.

Is responsible for the petty cash fund.

Required:

(a) Advise Dottie on how to distribute the various functions among Clerk #1, Clerk #2, and Clerk #3, assuming all functions require about the same amount of time.

(b) Explain at least three combinations of functions that would be unsatisfactory.

Explanation / Answer

Part a:

Clerk 1

Clerk 2

Clerk 3

Functions

Maintaining disbursement journal

Reconciles bank account

Prepare checks for signature

Deposits cash receipts

Open mails and list receipts

Maintain accounts receivable records

Determines when accounts receivable are uncollectible

Responsible for pretty cash fund

Part b:

Following three combinations would be unsatisfactory:

Thus, all the above combination will be unsatisfactory.