Question

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SoftData, a vendor, sends an invoice to Accuflow for data warehousing support services. The invoice is sent directly to Megan Waters, the accounts payable clerk, who manually records the invoice in the accounts payable subsidiary ledger. Once the invoice is recorded it is forwarded to Stan Phillips, the cash disbursements clerk, for processing. Stan prepares a check to pay the invoice and sends the check and invoice to John Sterling, the company treasurer. John approves and signs the check and cancels the invoice. John then mails the check back to SoftData and returns the canceled invoice to Stan for recording in the cash disbursements journal and filing. Once a week, Megan manually posts disbursements from the cash disbursements journal to the accounts payable subsidiary ledger. Required Identify any internal control weaknesses that exist for the Accuflow cash disbursements process.

Answer 1

The following are the internal control weaknesses

1) Check numbers were not recoded in cash disbursement register.
2) Preparation of check and recording in the cash disbursements journal is done by the same person i.e. by Stan
3) All the accounts have been recorded manually by accounts payable clerk.
4) All the disbursements have been recorded by the accounts payable clerk once a week
5) No Bank reconciliation has been prepared to verify the check images and cash disbursement.