Question 1

The Art Appreciation Society operates a museum for the benefit of charitable
organizations within Batangas City area.

When the museum is open to the public, two clerks who are positioned at the entrance
collect a Php50 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 each 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 that provides the basis for the weekly
entry in the accounting records.

The Art Appreciation Society’s board of directors has identified a need to improve its
internal controls over 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.

However, the board has agreed that the sale of admission tickets must be an integral
part of its improvement efforts.

Mr. Barney Stinson has been asked by the board of directors of the Art Appreciation
Society to review the internal control over cash admission fees and to provide
suggestions for improvements.

REQUIRED: Indicate the weaknesses in the existing internal controls over cash
admission fees that Mr. Barney Stinson should identify. Recommend one improvement
for each of the weakness identified. Use the following illustrative example:
WEAKNESS RECOMMENDATION
There is no basis for establishing the Pre-numbered admission tickets should
documentation of the number of paying be issued upon payment of the admission
patrons. fee.
The amount that has been collected from Record the names of non-members
non-members patron as their admission patron indicating the amount of money
fees are not recorded. they paid in order to easily determine
whether the amount of cash on hand are
tally with the total amount in the record
list.
There is no division of work between the One clerk should be assigned as the
two clerks and the treasurer. collection clerk to collect admission fees
and issued a pre-numbered ticket while
another clerk should be assigned as
admission clerk for authorization of ticket
that must be distributed to non-members
patron.

The treasurer should sign a statement

stating the amount received by the
treasurer from the clerk and kept it for the
purpose of comparison incase of
discrepancy.

There is no proper documentation of cash The treasurer should sign a statement

delivered by clerk to the treasurer. stating the amount received by the
treasurer from the clerk and kept it for the
purpose of comparison incase of
discrepancy.

The cash receipts is not immediately Cash collections should be deposited

recorded as well as deposited to the atleast once a day by the treasurer and
bank. should be recorded daily by the collection
officer to the permanent record. Because
accurate and timely posting of cash
receipts is critical to maintain accurate
award cash balances and reduce
outstanding deficits.
WEAKNESS RECOMMENDATION
There is no existing adequate documents There must be receipts for every
and records transaction in which the clerks receive
cash from the patrons to obtain
reasonable assurance that cash on hand
are equal to the number of receipts. Aside
from that there should be an existing
documents stating the signature of the
clerk and the treasurer upon delivering
the proceeds to the treasurer.

There is a lack of Human Resources They should hire another employee who
Recommendation will perform the task of delivering all cash
to the banks. It will lessen the burden of
works of other employees including the
treasurer and help to be more productive
in their specific tasks.

There is no existence of money counter The business should invest on money

machine counter machine to avoid human error in
terms of counting money.

There is a lack of computerized The treasurer should sign a statement

accounting stating the amount received by the
treasurer from the clerk and kept it for the
purpose of comparison incase of
discrepancy.

The cash receipts is not immediately Cash collections should be deposited

recorded as well as deposited to the atleast once a day by the treasurer and
bank. should be recorded daily by the collection
officer to the permanent record. Because
accurate and timely posting of cash
receipts is critical to maintain accurate
award cash balances and reduce
outstanding deficits.
WEAKNESS RECOMMENDATION
Absence of technological resources They should adapt the technological
advancement. Having those equipments
will help them to control their financial
activities wisely. It can also lessen the
mistakes for them to have reliable and
accurate data.

Weak physical control measures Cash drawer should be opened only

when a transaction is entered. Moreover,
proper storage of cash before the deposit
must be considered.

Issuance of unauthenticated deposit skip Inplementing schedules for submitting

or documentation as basis for weekly reports per everyday transaction (can be
transactions; absence of listing each weekly as well); issuance of
transactions per week authenticated receipt or documentation
that serves as a proof for the deposit of
cash in the bank.

Identification Security for the Membership The members should also present
Cards of the members of the Art another identification card and a log book
Appreciation Society that must be filled up upon entry. They
should resort to a more automated way of
recognizing identity like using fingerprint
scanner.
There is no assurance that the cash given There should be a prenumbered tickets
to the treasurer is accurate to the amount and stubs to reconciled it with the
being collected from the paying patrons. collected cash given to the treasurer.
The Treasurer only counts the cash in The two clerks should have more detailed
front of the clerk which is assigned for the job roles. The one who will gave the cash
collection, thus treasurer failed to to treasurer should be different from the
recognize if it is tallied since there is no clerk which is assigned in collecting the
prenumbered tickets that can support it. pay from patrons.
WEAKNESS RECOMMENDATION
There are insufficient data back ups They must have another safe or storage
area for proper compiling of documents,
they should have a photocopy or request
for another copy of authenticated deposit
slips for data entry.
There is a lack of own management software Instead of manually recording such
transactions, management should install
software, or accounting software that
helps track every transaction, and have
more reliable source of information about
the business. Moreover, you can also
easily determine the profit and what
aspect in your business you lack of.