Reference no: EM133137396
Question - You have recently been engaged to audit Bayanihan Foods Corporation [Baguio Branch] for its December 31, 2020 financial statements. You have reviewed the Corporation's procedures for handling receipts, and the following were noted:
1. Cash collections on over-the-counter sales and cash on delivery (COD) sales are received from the customer or delivery service by Jose Rizal, cashier. Upon receipt of cash, Mr. Rizal stamps the sales ticket as "PAID" and files a copy for future reference.
2. Mail is opened by Andres Bonifacio, the credit manager's secretary, and remittances are given to the credit manager for his review. The credit manager, Mr. Gregorio del Pilar, then places the remittances on a tray on Mr. Rizal's desk. At the daily deposit cut-off time, Mr. Rizal delivers the checks and cash on hand to Ms. Gabriela Silang, assistant credit manager, who prepares remittance lists and fills up the bank deposit slip, which she also takes to the bank. Ms. Silang also posts remittances to the accounts receivable ledger cards and verifies the cash discount allowable.
3. You also verified that Mr. del Pilar obtains approval from the head office of Bayanihan Foods Corporation, to write off uncollectible accounts and that he has retained in his custody, at the end of the year, some remittances that were received on various days during the last month.
Required -
1. Describe the irregularities that might occur under the procedures now in effect for handling cash collections and remittances.
2. What procedures would you recommend to strengthen the internal control over cash collections and remittances?
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