Question

At the local cinema, you notice that there is a box office at the entrance where the cashier receives cash from customers and, with a press of a button, a machine ejects serially numbered tickets. To enter the movie theatre, a customer must present his or her ticket to the door attendant. The attendant tears the ticket in half and returns the stub to the customer. The other half of the ticket is dropped into a locked box.

Required

Identify and explain two internal control principles that you feel are present in this scenario.

Answer 1

In the given scenario, we can identify two of the effective internal control principles that are followed:-

1.) Segregation of Duties:-

Segregation of duties is the requirement of having more than one person to perform a specific task thereby delegating the duties in such a way that the scope to commit fraud is limited. Segregation of duties divides the main functions by separating the tasks of custody of assets, authorization of the use of assets and recordkeeping of assets.

In the above scenario, we can see that the customers pay cash at the entrance to the cashier. The cashier in turn , with a press of a button , ejects the serially numbered tickets which are given to the customer. These tickets are given by the customer to the door attendant who tears the ticket in half and returns the stub to the customer. By ensuring that the duties of issuing tickets and verification of tickets is separated, the scope to commit any fraud or embezzlement is limited. Also, since the tickets are numbered the audit of cash becomes a simpler process.

2.) Prenumbered tickets:-

Whenever the tickets are issued by the cashier they are prenumbered. Every customer is given a prenumbered ticket which is checked by the door attendant at the time of entering the local cinema. The door attendant tears the ticket in half and returns the stub to the customer. The other half of the ticket is dropped in a lockbox. This way there is internal reconciliation of the tickets sold and the number of people entering the cinema.

If there is any ticket numbers that are missing , the supervisor would now be able to investigate and follow up with the responsible parties for the reasons on why there is a missing ticket number. This will also help the management to do a reconciliation between the number of tickets sold and the number of customers actually visiting the local cinema.