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Internal Control Systems

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You have been asked by the board of trustees of a local church to review its accounting procedures. As a part of this review, you have prepared the following comments relating to the collections made at weekly services and recordkeeping for members' contributions:

1. The church's board of trustees has delegated responsibility for 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 considered necessary in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years.

2. The collection at the weekly service is taken by a team of ushers. The head usher counts the collection in the church following each service. He then places the collection and a notation of the amount counted in the church safe. Next morning the financial secretary opens the safe and counts the collection again. She withholds about $100 to meet cash expenditures during the coming week and deposits the remainder of the collection intact. To facilitate the deposit, members who contribute by check are asked to draw their checks to cash.

Describe the weaknesses and recommend improvements in procedures for collections made at weekly services. Organize your answer using the following format:

weakness/ recommended improvements

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Solution Summary

This solution provides an explanation of internal control systems for a church.

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The weaknesses are:

a. The church should have had a certified accountant audit the financial records at least on a yearly basis.
b. It is fine that the finance committee prepared the annual budget but I think that they should not be the ones auditing the financial records.
c. The finance committee is not involved in collections and recordkeeping.
d. No audit has been done in recent years. Therefore, the question is when did the ...

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