The Art Appreciation Society operates a museum for the benefit and enjoyment of the community. 

When the museum is open to the public, two clerks who are positioned at the entrance collect a $10.00 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 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 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. 

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

Required:

a. Indicate weaknesses in their processes over cash admission fees that Smith should identify, and recommend one improvement for each of the weaknesses identified. Organize the answer as indicated in the following illustrative example. 

b. Indicate which of the weaknesses, if any, increase the likelihood of misappropriation of assets. 

c. Indicate which of the weaknesses, if any, increase the likelihood of fraudulent financial reporting.

Transcribed Image Text:

Weaknesses in Processes Recommendations 1. There is no basis for establishing the 1. Prenumbered admission tickets number of paying patrons. should be issued upon payment of the admission fee.