Thursday
November 27, 2014

Homework Help: ACCOUNTING

Posted by ANDRE on Monday, March 16, 2009 at 9:23pm.

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.

Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.

(b) List the improvements in internal control procedures that you plan to make at the
next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial
secretary, and (4) the finance committee.

(c) What church policies should be changed to improve internal control?

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