Case 3: Internal control assessment

The Modern Arts Society operates a museum for the benefit and enjoyment of the community. The Society has two class of clients, namely, members and non-members. During normal opening hours, two clerks who are positioned at the entrance collect a $5.00 admission fee from visiting non-member visitors. Members of the Modern Arts 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 clerks and places cash 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 Modern Arts Society has identified a need to improve the internal control system over cash admission fees. The board has determined that the cost of installing turnstiles or sales booths or otherwise altering the physical layout of the museum would greatly exceed any benefits that might be derived. However, the board has agreed that the sale of admission tickets must be an integral part of its improvement efforts.

Rasheed, a board director, has been asked by the board of directors of the Modern Arts Society to review the internal control over cash admission fees and suggest improvements.

Required:

Indicate seven weaknesses in the existing internal control system over cash admission fees, which Samer should identify, and recommend one improvement for each of the weaknesses identified.

(20 marks)