Question

The art appreciation society operates a museum for the benefit and enjoyment of the community. During hours when the museum is open to the public, two clerks who are positioned at the entrance collect a $5.00 admission fee from each nonmember patron. Members of the Art Appreciation Society are permitted to enter free of charge upon presentation of their membership cards. At the end of the day, one of the clerks delivers the proceeds to the treasurer. The treasurer counts the cash in the presence of the clerk and places it in a safe. Each Friday afternoon the treasurer and one of the clerks deliver all cash held in the safe to the bank, and receive an authenticated deposit slip which provides the basis for the weekly entry in the cash receipts journal.The Board of Directors of the Art Appreciation Society has identified a need to improve their control procedures for cash admission fees. The board has determined that the cost of installing turnstiles, sales booths, or otherwise altering the physical layout of the museum will greatly exceed any benefits which may be derived. However, the board has agreed that the sale of admission tickets must be an integral part of its improvement efforts.Required: Identify three internal control weaknesses and suggest a solution for each. Be as specific as possible.

Answer 1

Answer:

1)

Deficiency:

There is no method for determining the exact number of members of the Art Appreciation Society that actually enter the museum every day. The person that allows them to enter is the same person that charges the entrance fee.  

Recommendation:  

Since there are two clerks, one should deal with paying patrons and the other one should be in charge of allowing non paying members of the Art Appreciation Society to enter the museum.

2)

Deficiency:

There is no method that controls and documents the number of paying visitors.

Recommendation:

The simplest and cheapest way to solve this issue is to issue prenumbered tickets to paying visitors.

3)

Deficiency:

There is a chance that the same clerk delivers the cash to the treasurer and goes to the bank to make the deposit. if this happens, there would be no control over the daily proceeds and the money deposited.

Recommendation:

One of the clerks should be in charge of delivering the daily proceeds to the treasurer, and the other one should be in charge of going to the bank with the treasurer. Probably the best alternative would be that the clerks change tasks every week, e.g. one week clerk 1 delivers the cash to the treasurer, next week clerk 2 should do it.

Answer 2

Weaknesses in the collecting and recommendation systems.

Weaknesses:

One problem is that the gathered amount should not be deposited by the Treasurer and Clerk since they are collecting and retaining the money for a long time before depositing it.

Recommendation:

A different individual should be selected to deposit this amount on a regular basis, as involving more people reduces the chance of fraud and ensures a flawless internal control system.

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