Identify the internal control principles and their application to cash disbursements of
Marais Company.
P7-2B The board of trustees of a local church is concerned about the internal accounting
Controls pertaining to the offering collections made at weekly services. They ask you to
Serve on a three-person audit team with the internal auditor of the university and a CPA
Who has just joined the church. At a meeting of the audit team and the board of trustees
You learn the following.
1. The church’s board of trustees has delegated responsibility for the financial management
And audit of the financial records to the finance committee. This group prepares
The annual budget and approves major disbursements but is not involved in collections
Or recordkeeping. No audit has been made in recent years because the same
Trusted employee has kept church records and served as financial secretary for 15
Years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to
Serve for 1 month. The ushers take the collection plates to a basement office at the
Rear of the church. They hand their plates to the head usher and return to the church
Service. After all plates have been turned in, the head usher counts the cash received.
The head usher then places the cash in the church safe along with a notation of the
Amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection.
The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected
For the week, and deposits the remainder of the collections in the bank. To facilitate
The deposit, church members who contribute by check are asked to make their
Checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy
Of the reconciliation to the board of trustees. The reconciliations have rarely contained
Any bank errors and have never shown any errors per books.

Question
Indicate the weaknesses in internal accounting control in the handling of collections.

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The secretary should not be reconciling the bank statement. The monthly bank statement should go directly to the pastor or a Trustee for reconciliation.

After the ushers count the money, one of them should deposit it to the bank and give the deposit slip to the secretary.

Church members should be writing their checks to the church, not to cash.