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    Drotos Theaters Case Study

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    See attached case file.

    Please help with the following:

    o Evaluate the manual and computerized control activities.
    o Discuss internal controls that are and are not present in the above scenario.
    o Assess internal control limitations and risks.
    o Discuss your concerns given your knowledge that the previous audit firm resigned from the engagement.
    o Recommend controls to prevent and detect financial misstatements.
    o Discuss which controls you would put into place to assure the separation of duties for back office accounting staff.
    o Recommend procedures for detecting employee fraud concerning cash.
    o Explain how the cashier and ticket taker might steal cash and describe the controls you would put into place to keep this from occurring.

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    o Evaluate the manual and computerized control activities.

    The manual and computerized control activities at Drotos are really weak. Consider this; there should have been separation of tasks between the entering of the amount deposited into the accounting system and the depositing of the amount in the bank. Further, there is no check on the controller if he deposits and enters a lower amount that what he actually receives. Further, what if cashers issue tickets without receiving cash or alternately, cashiers deposit lower amount of cash than actually received by them? Further, there is no control system to ensure that the tickets received by the ticket taker at the door are tickets issued for cash at the ticket counter. The function of the ticketing system vendor is not clear. What if he issues tickets on his own and persons holding those tickets enter the theater.

    o Discuss internal controls that are and are not present in the above scenario.

    Drotos has several control systems missing. Another person, not the controller should be responsible for deposing the cash and bringing back the bank receipt the next day. The person who enters the amount issued to the person making the deposit may then verify the amount issued to him and match it with the amount on the bank receipt. If an amount is entered into the computerized system, the same amount must appear on the deposit slip and the deposit slip must be preserved in records.

    The ticket number issued by the casher should appear at an indicator near the door keeper and the tickets should correspond to exact seats in the theater. The number of tickets issued to each cashier should be matched with the cash realized and the unsold tickets should be received back from ...

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