IAF 520 AUDITING

ASSIGNMENT 2
BY: SYED ZAIDI
STUDENT ID #: 65681132
FOR: MR. TIM DALEY
DUE DATE: MONDAY, NOVEMBER 28, 2016
 IAF 520 AUDITING 1
Assignment #2

A) The five weaknesses in the cash admissions system which PAL potentially faces are:

1) There is no clarity in how the duties are divided between the employees specifically

the clerks who collect admission fees and the ones that grant admissions and this

could lead to confusion as to who is responsible for what tasks on a daily basis.

2) There is no system in place to prove the accuracy of the amounts of cash collected by

the clerks, and there could be potential risks of theft and fraud as the clerks could

pass off certain cash receipts as Free Membership and keep the cash for themselves.

3) There are no accurate records to indicate which customers are members of the club

and which ones are not, and this could again pose the risk of fraud, as non-member

customers can potentially avoid paying the fees to the Club by presenting a

Member’s card and as a result get free admission.

4) The Cash is deposited weekly in the bank and not daily. This could again be risky, as

there is a greater chance of error in posting the cash receipts weekly, as well as lead

to a compromise of safety with the cash lying in the safe for a long time.

5) There are no records which show the internal accountability associated with

maintaining the cash inflow.

B) The recommendations that I can provide for the above mentioned weaknesses are:

1) There should be clear duties that should be divided between the two clerks. One

clerk needs to approve the entrance to members, while the other clerk needs to

collect the cash from ticket sales to non-members. This would ensure a more

defined and clear segregation of duties to ensure minimal risks and errors when

handling cash collection and admission duties.

2) The Treasurer needs to reconcile the total amount of cash collected every day to the

amount of ticket sales that occurred for that day and make sure that they match fully

and check with the clerk that is issuing the tickets to ensure there are no theft and

fraud risks.

3) The club should issue Photo IDs for members so that there is no chance of fraud and

the collection clerks can accurately identify and differentiate the members from the

non-members. In addition, there should be one time generated non-changeable and

non-refundable tickets that should be issued to non-members and this policy would

need to be enforced

4) Cash should be deposited daily instead of weekly, as it would ensure a lot smoother

process in entering the amounts in the cash journal and reduce the risk of error, and

also ensure that the cash is safely deposited in the bank.

5) The Treasurer should issue a daily signed receipt for all cash that is collected by the

clerk and to maintain all these receipts and periodically check them against all

deposit records and cash receipts.