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    chiikena's Avatar
    chiikena Posts: 1, Reputation: 1
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    #1

    Apr 14, 2012, 08:27 AM
    ACCOUNTING 400 Answers to All Problems for Free
    I'm not understanding at all

    Instructions
    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.
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
    Ultra Member
     
    #2

    Apr 14, 2012, 04:42 PM
    From an internal control point of view these procedures breach all the guidelines. Internal control is about accountability and in order for there to be accountability each stage must be appropriately witnessed and attested. The church's trustees have been negligent in failing to require adequate systems of internal control.
    So, counting of receipts should be done by two people and the count attested to by each with a written copy placed in the safe with the funds and at least one other copy retained by the head usher.
    Banking should be done promptly, preferably by a person other than the financial secretary and no deduction should be made. Cheques should be made out in the name of the church and crossed not negotiable. All cheques received should be banked in the church's bank account
    Payments should be made on the authority of two signatories and cash payments should be avoided and confined to minor transactions. A petty cash fund should be maintained for this purpose, regularly reconciled and reimbursed from the church's bank account

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