Natalie is struggling to keep up with the recording of her accounting transactions. She is spending a lot of time mark
Natalie is struggling to keep up with the recording of her accounting transactions. She is spending a lot of time marketing and selling mixers and giving her cookie classes. Her friend John is an accounting student who runs his own accounting service. He has asked Natalie if she would like to have him do her accounting.
John and Natalie meet and discuss her business. John suggests that he could perform the following procedures for Natalie:
1. Take the deposits to the bank every Friday. All cheques and cash received would be kept in a locked box at Natalie's house.
2. Write and sign all of the cheques. He would review the invoices and send out cheques as soon as the invoices are received.
3. Record all of the deposits in the accounting records.
4. Record all of the cheques in the accounting records.
5. Prepare the monthly bank reconciliation.
6. Transfer Natalie's manual accounting records to his computer accounting program. John maintains the accounting information that he keeps for his clients on his laptop computer.
7. Prepare monthly financial statements for Natalie to review.
8. Write himself a cheque every month for the work he has done for Natalie.
(a) Refer to items 1 to 8 above. Identify the procedures that Natalie should perform and explain why.
(b) Identify the procedures that John could perform.
(c) For each procedure that Natalie should perform, identify what could go wrong, in a worst-case scenario, if John were to do it.
(d) Once Natalie decides what procedures she would like John to perform, what are some of the advantages and disadvantages of having John perform these accounting services for Cookie Creations?