Question

Internal Control Case Study

Harper Theater is located in Midtown Mall. The cashier’s booth is near the entrance to the theater. Two cashiers are employed. Once works from 1-5 pm, the other from 5-9 pm.   Each cashier is bonded. The cashiers receive cash from customers and operate a machine that ejects serially numbered tickets. The rolls of tickets are inserted and locked into the machine by the theater manager at the beginning of each cashier’s shift.

After purchasing a ticket, the customer takes the ticket to an usher stationed at the entrance to the theater lobby some 60 feet from the cashier’s booth. The usher tears the ticket in half, admits the customer, and returns the ticket stub to the customer. The other half of the ticket is dropped into a locked box by the usher.

At the end of each cashier’s shift, the theater manager removes the ticket roll from the machine and makes a cash count. The cash count sheet is initialed by the cashier. At the end of the day, the manager deposits the receipts in total in a bank night deposit vault located in the mall. The manager also sends copies of the deposit slip and the initialed cash count sheets to the theater company treasurer for verification and to the company’s accounting department. Receipts from the first shift are stored in a safe located in the manager’s office.

Required: using Microsoft Word, answer the following questions and attach the document to this assignment:

1. Identify the internal control procedures and their application to the cash receipts transactions of the Harper Theater. You will find the Internal Control Procedures. The Internal Control procedures are establishment of clear responsibilities, proper documentation, adequate insurance, separation of assets from custody, separation of duties, and use of technology.  For each Internal Control Procedure, identify any Internal Control Procedures that Harper Theater has in place and/or is missing. Be specific and use at least 300 words for your answer.
2. If the usher and cashier decide to collaborate to misappropriate cash, what actions might they take? For each action, what internal control might be employed to stop the misappropriation of cash? Be specific and use at least 200 words for your answer.
3. Use complete sentences and good grammar.  

DO NOT COPY PREVIOUS ANSWERS THEY ARE INCORRECT

Answer 1

The Internal Control procedures are establishment of clear responsibilities, proper documentation, adequate insurance, separation of assets from custody, separation of duties, and use of technology.

Following internal procedures can be implemented at Harper Theatre in order to ensure that there is no mis appropriation of cash

1. Recording the number of tickets

It should be the responsibility of the cashier and the usher both to separately count and maintain the records of total tickets printed and issues and total number of torn stubs dropped into the locked bin.

The starting ticket (serial number) and the last ticket serial number should be recorded by the Cashier.

2. Reconciling the number of tickets

The theatre Manager should reconcile the no. of tickets as per cashier and as per usher to identify discrepancies if any.

Segregation of duties between Cashier, Usher and the manager will help in ensuring responsibility and accountability for their actions.

The Cashier should reconcile the no. of tickets sold and the Cash, which should be verified and approved by the Theatre manager.

Also shift-wise daily records of the tickets and cash handled by each cashier should be maintained in the Database system or ERP. This will ensure that the data is stored in a secure manner and to ensure minimum manual intervention with

3. Cash deposited into Banks and deposit slips

manager deposits the receipts in total in a bank night deposit vault located in the mall. The manager also sends copies of the deposit slip and the initialed cash count sheets to the theater company treasurer for verification and to the company’s accounting department. The treasurer should also sign off on such documentation to demonstrate an independent verification and approval of deposit and collection of money.