Question

In: Accounting

To enter Starbright fun parlour you need to obtain a ticket form the ticket office and...

To enter Starbright fun parlour you need to obtain a ticket form the ticket office and then present it to the person at the entrance. To obtain the ticket you go the ticket office where you receive a pre-numbered ticket on payment of the ticket price. When the door attendant receives the ticket he tears off the stub and gives it to the customer and puts the rest of the ticket in a locked container.

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

Solutions

Expert Solution

Answer:-

Internal Control is the process designed by the management and other personnel to achieve goals of the organization.It provides an assurance on the relaibility of the financials and operating effectiveness of the organization.The stronger the internal controls the more reliable the financials and operations.

In the given scenario following internal control principles are present:-

1.Seggregation of duties:-In the given case,pre-numbered tickets are to be taken from ticket office and present it to the door attendant at the door.One person is not given the entire control.Hence there is seggregation of duties.

2.Principle of Review:-Work of one person is checked by another i.e.,work of ticket office is checked by door attendant.Also,tickets are torn off by the door attendant which further ensures that same ticket is not used by two individuals.

3.Principle of Responsibility:-Responsibilities relating to work are properly divided between the person at ticket office and the door attendant.There is no confusion or doubts.

4.Principle of Skepticism:-One person is not given the entire control and hence too much confidence on one person is not present in the current situation.Also,tickets are pre-numbered which assures that no two tickets of same number are given to anyone.


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