The implementation of the new cash receipts procedure is to improve the efficiency and effectiveness involved with recording customer payments and eliminating risks involving fraudulence in the organization. Although this effective new system highlights many opportunities, the emphasis on internal controls still plays an important role for the Optima Phone Company. This short essay will highlight potential problems in the internal control structure that may occur due to the establishment of the new system. The destruction of the remittance advice is a concerning issue involving the internal control structure.

A remittance advice provides physical evidence indicating the customer details and amounts paid for, this justifies the importance that all remittance advices should be filed and stored. Should the system break down the remittance advice could be referred to as a verification that the payment has been made. To solve this problem would to incorporate the development of a pre-list before the remittance advice be destroyed. At least there would be physical evidence against the deposit slip if there were a need for a reconciliation.

As it is common for humans to make mistakes, online processing could be a potential target for internal control problems. Under/ Overestimating could be seen as a fraudulent act or as a simple mistake. With the execution of this new system, it impossible to detect any such act until the financial statements have been audited and will be hard to comprehend as there are no physical evidence such as the remittance advice. Carrying out reconciliation with the remittance advice or pre-list against the deposit slip before it is banked could prevent any such matter occurring. It could prevent a fraudulent matter where the operator would understate the deposit to gain personal value. To be totally efficient reconciliation should occur on a daily basis.

To be certain that the deposits are correctly banked, a bank reconciliation should regularly be implemented with the new system, as it gives a clear indication on the true amounts deposited. Another way to prevent any fraudulent affairs occurring is to implement the segregation of duties. As the flow chart has indicated most of the transactions and processing is dealt only with the operator. If the operator decides to act fraudulently by understating or destroying any evidence that a payment has gone through, there would be no way of detecting the problem since the remittance advice has been destroyed and no form of segregation of duties.

To improve the situation, the person who receives the mail and the person who enters the data in the system should be separate. Although this new system is an efficient systematic way of recording receipts, it does not prevent internal control problems from occurring, This essay has highlighted some of the internal control problems involved and has set out some suggestions to improve and diminish such problems. It is important to obey and prevent any problems from occurring as it may lead to fraudulence and the deterioration of an organization.