As the internal auditor for a large company, you have been asked to consult with the operating management of a new division that consists of a chain of video game arcades. Specifically, the management wants advice on the nature of accounting risks posed by the new operation and on the internal controls needed to reduce those risks. In reviewing the proposed video game arcade operation, you learn the following information. The chain will consist of 40 locations, the most distant location being only 200 miles from the corporate offices. The 40 locations will be divided into two regions, each having a regional manager. Each location will contain an average of 35 machines, with some locations having as many as 60 machines and others having as few as 10 machines. Access to the game counter and coins in each machine will be by use of a master key.
To minimize cost, the management insists on minimizing the number of operating and accounting personnel. However, the management has agreed to hire sufficient maintenance personnel in- house to minimize downtime. The management also has agreed to provide a local manager for each operating location because of the cash nature of the business. The management insists on daily collection and deposit of coins in a local bank by the resident manager. Validated deposit slips are to be mailed to the corporate offices. Bank statements will be mailed directly by the banks to corporate offices. Required The definition of internal accounting control addresses aspects of transaction execution, transaction recording, access to assets, and periodic comparisons of accountability. Based on these aspects and using the format that follows: a. Identify the risks for the major activities listed. b. Suggest internal accounting controls for the risks identified. The required answer format is asshown:

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Activity Transaction execution Transaction recording Access to assets Periodic comparisons of accountabilit Risk Control