The board oftrustees of a local church is concerned about the internalaccounting controls pertaining to the offering collections made at weekly services. They ask you to serve on a three-person audit teamwith the internal auditor of the university and a CPA who has justjoined the church. At a meeting of the audit team and the board oftrustees you learn the following.
1. The church's board of trustees has delegated responsibility forthe financial management and audit of the financial records to thefinance committee. This group prepares the annual budget andapproves major disbursements but is not involved in collections orrecordkeeping. No audit has been made in recent years because thesame trusted employee has kept church records and served asfinancial secretary for 15 years. The church does not carry anyfidelity insurance.
2. A team of ushers, who volunteer to serve for 1 month, takes weeklyservice collections. The ushers take the collection plates to abasement office at the rear of the church. They hand their platesto the head usher and return to the church service. After allplates have been turned in, the head usher counts the cashreceived.
The head usher then places the cash in the church safe along with anotation of the amount counted. The head usher volunteers to servefor 3 months.
3. The next morning the financial secretary opens the safe andrecounts the collection. The secretary withholds $150 - $200 incash, depending on the cash expenditures expected for the week, anddeposits the remainder of the collections in the bank. Tofacilitate the deposit, church members who contribute by check areasked to make their checks payable to "Cash."
4. Each month the financial secretary reconciles the bank statementand submits a copy of the reconciliation to the board of trustees.The reconciliations have rarely contained any bank errors and havenever shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in thehandling of collections.
(b) List the improvements in internal control procedures that youplan to make at the next meeting of the audit team for (1) theushers, (2) the head usher, (3) the financial secretary, and (4)the finance committee.
(c) What church policies should be changed to improve internal control?