Explain potential misstatements - cash receipt and the description of of misstatements. The Recording fictitious cash receipts, Failure to record receipts from cash sales, Failure to record cash from collection of accounts receivable and Early (late) recognition of cash receipts "cutoff problems" Failure to record cash fromcollection of accounts receivableEarly (late) recognition of cash-"cutoff problems"receiptsFraud:●Internal Control Affecting Assets●●A cashier embezzles cashpayments by customers onreceivables, withoutrecording the receipts in thecustomers' accounts.A bookkeeper accidentallywho has access to cashreceipts embezzles cashcollected from customersand writes off the relatedreceivables.Error:• A bookkeeper accidentallyfails to record payment ona receivable.Fraud:● Holding the cash receiptsjournal open to record nextyear's cash receipts ashaving occurred in thisyear.Error:● Recording cash receiptsbased on bad informationabout date of receipt.247Lack of segregation ofduties between personnelwho have access to cashreceipts and those whomake entries into theaccounts receivablerecords.Lack of segregation ofduties between personnelwho have access to cashreceipts and those whomake entries into theaccounts receivablerecords.Inadequate reconciliationsof subsidiary records ofaccounts receivable withthe general ledger controlaccount.Ineffective board ofdirectors, audit committee,or internal audit function;"tone at the top" notconductive to ethicalconduct; undue pressure toshow improved financialposition.Failure to list and depositcash receipts on a timelybasis.●● 246Chapter 164. Record cash receipts on a timely basis.5.Encourage customers to obtain receipts and observe cash register totals.6. Deposit cash receipts daily.7.Make all disbursements by check or electronic funds transfer, with theexception of small expenditures from petty cash.8.Have monthly bank reconciliation prepared by employees notresponsible for the issuance of checks or custody of cash. The completedreconciliation should be reviewed promptly by an appropriate official.9. Monitor cash receipts and disbursements by comparing recordedamounts to forecasted amounts and investigating variances fromforecasted amounts.Potential Misstatements - Cash ReceiptsDescription of MisstatementExamplesInternal Control Weakness orFactors that Increase theRisk of the MisstatementRecording fictitious cash receiptsOverstating cash receiptson the books bytransferring cash betweenbank accounts withoutappropriate recording ofthe transfer to cover up anembezzlement of cash.Lack of segregation ofduties of the functions ofaccess to cash and recordkeeping; no effectivereview of bankreconciliations.Failure to record receipts fromcash salesA cashier fails to ring upand record cash sales andembezzles the cash.Inadequate supervision ofcashiers; failure toencourage customers toobtain cash receipts.Inadequate controls forA bookkeeper accidentallyomits the recording of thereceipts from one cashregister for the day.reconciling cash regisiertapes and accountingrecords; inadequatecontrols for reconcilingbank accounts.Froud:●Fraud:●Error:●●

Question

Explain potential misstatements - cash receipt and the description of of misstatements. The Recording fictitious cash receipts, Failure to record receipts from cash sales, Failure to record cash from collection of accounts receivable and Early (late) recognition of cash receipts &#34;cutoff problems&#34; Failure to record cash fromcollection of accounts receivableEarly (late) recognition of cash-&#34;cutoff problems&#34;receiptsFraud:●Internal Control Affecting Assets●●A cashier embezzles cashpayments by customers onreceivables, withoutrecording the receipts in thecustomers' accounts.A bookkeeper accidentallywho has access to cashreceipts embezzles cashcollected from customersand writes off the relatedreceivables.Error:• A bookkeeper accidentallyfails to record payment ona receivable.Fraud:● Holding the cash receiptsjournal open to record nextyear's cash receipts ashaving occurred in thisyear.Error:● Recording cash receiptsbased on bad informationabout date of receipt.247Lack of segregation ofduties between personnelwho have access to cashreceipts and those whomake entries into theaccounts receivablerecords.Lack of segregation ofduties between personnelwho have access to cashreceipts and those whomake entries into theaccounts receivablerecords.Inadequate reconciliationsof subsidiary records ofaccounts receivable withthe general ledger controlaccount.Ineffective board ofdirectors, audit committee,or internal audit function;&#34;tone at the top&#34; notconductive to ethicalconduct; undue pressure toshow improved financialposition.Failure to list and depositcash receipts on a timelybasis.●● 246Chapter 164. Record cash receipts on a timely basis.5.Encourage customers to obtain receipts and observe cash register totals.6. Deposit cash receipts daily.7.Make all disbursements by check or electronic funds transfer, with theexception of small expenditures from petty cash.8.Have monthly bank reconciliation prepared by employees notresponsible for the issuance of checks or custody of cash. The completedreconciliation should be reviewed promptly by an appropriate official.9. Monitor cash receipts and disbursements by comparing recordedamounts to forecasted amounts and investigating variances fromforecasted amounts.Potential Misstatements - Cash ReceiptsDescription of MisstatementExamplesInternal Control Weakness orFactors that Increase theRisk of the MisstatementRecording fictitious cash receiptsOverstating cash receiptson the books bytransferring cash betweenbank accounts withoutappropriate recording ofthe transfer to cover up anembezzlement of cash.Lack of segregation ofduties of the functions ofaccess to cash and recordkeeping; no effectivereview of bankreconciliations.Failure to record receipts fromcash salesA cashier fails to ring upand record cash sales andembezzles the cash.Inadequate supervision ofcashiers; failure toencourage customers toobtain cash receipts.Inadequate controls forA bookkeeper accidentallyomits the recording of thereceipts from one cashregister for the day.reconciling cash regisiertapes and accountingrecords; inadequatecontrols for reconcilingbank accounts.Froud:●Fraud:●Error:●●

Accepted Answer

Frauds and errors with cash possible in many ways by the employees dealing with it and is a highly…