MEMORANDUM
A new client, Bob’s Construction, Inc., is a large hardware store servicing construction companies working throughout Massachusetts. Your manager has asked you to write a memorandum to the client detailing your recommendations to improve the companys’ internal control. Below is a list of observations from your recent visit.
* No documentation is made when purchases are receiving or sales orders are shipped. Purchase orders and sales orders are pre-numbered, but are kept in no particular order.
* When supplies are requisitioned from the supply room, no documents are filed.
* Unissued checks were kept in an unlocked box in the office that is also not locked.
* The business keeps large bank balances and does not perform bank reconciliations.
* One employee collects the mail, receives customer payments, completes bank deposits, makes cash disbursements, enters transactions into the general journal and completes the financials statements.
* There are multiple salesmen that use one cash register.
* The cash register printer is often broken and does not print receipts.
* The company does not use any inventory system. Whenever a sales associate sees an empty item, it is recorded on a purchase order. At the end of the week, the purchase is ordered.
* Management states they have two bank loans. They know the monthly payment, but don’t remember how long the loan is for.
* There are 15 shareholders of the company, but is no documentation regarding the shares issued.