HorsesRUs is a small family-run business owned and operated by the Potter Family. Mrs. Potter, purchased the stable with her husband 10 years ago. Unfortunately, Mr. Potter passed away last year. Her sons, Harry and Dudley, are also listed as legal owners of the business but are not as involved in the operations as they are both married and moved to the city, away from the stable.

Mrs. Potter has been having a hard time keeping up to speed with the day-to-day operations of the company and hired a student, Draco, to help out as the administrator and bookkeeper. A part-time receptionist also works evenings and weekends, and there are part-time stables cleaners.

Draco performs most of the day-to-day tasks. Draco opens the mail, prepares deposits for monies received, and updates the accounting records. He makes deposits daily. He prepares bank reconciliations on a monthly basis, but notes that he may stop doing them because the owners don't review them anyway. The receptionist collects all payments made on site and hands them over to Draco for deposit and updating of the records. Since a horse can be ridden for a three-hour session per day, a calendar is maintained that shows the riding schedule for each horse. Occasionally, Draco asks the receptionist to collect money from a rider who is not listed on the schedule. When this occurs, the money is collected and a note is made for Draco. The receptionist has been instructed by Draco to not make the note directly on the schedule "so as not to confuse things."

HorsesRUs earns revenue in two different ways: riding revenue (charged at a rate per three-hour session), boarding fee revenue (for individuals with horses to rent out stalls). HorsesRUs also offers lessons but this is not a source of revenue for the business. Outside instructors are hired to provide lessons and lesson fees are paid to HorsesRUs and handed over to the instructors. "There seems to be some confusion about lesson rates," says the receptionist. "Lessons are $30 an hour for all instructors, but one of the clients mentioned that she has been paying the office $40 an hour. I'm not sure if that's an issue, since that money belongs to the outside instructors and we're just collecting it on their behalf."

"HorsesRUs is bringing in a lot of cash, but it seems to go right back out again!" notes Mrs. Potter. "Draco is always getting me to sign cheques. Sometimes I don't see the related invoice, but I know Draco will have it. I know there are a lot of expenses in running a business, but there are so many that it is hard to keep up. Harry, Dudley and myself are all able to sign cheques and only one signature is required, which sometimes gets confusing, as my sons come in and out of the house often to drop off groceries and my medication. Once, Harry and I both signed different cheques to pay the same computer supplier. When we called the supplier to ask for a refund, he told us he had sold us two computers, although we have only one in the office.

Harry seems to think that there may be opportunities for Draco to be exploiting his mother. He has hired you, CPA, to identify the control deficiencies for HorsesRUs and provide him with a list, along with the implications of these deficiencies and possible recommendations to mitigate the risks you identify.

Question: Identify 15 weaknesses from the case, their implications and possible recommendations to to mitigate the risk.

Weakness:

Implication:

Recommendation: