Question

Part a) City Cinema is a popular cinema in the downtown. The box office is located at the entrance to the cinema. When the cashier receives cash from customers, he/she ejects serially numbered tickets for each film and pass them to the customers. A customer has to present the ticket to a ticket taker stationed 20 meters away from the box office in order to gain admission to the theater lobby. The ticket taker tears the ticket in half, returns the stub to the customer, and allows the customer to enter the cinema hallway through a turnstile (a mechanical gate consisting of revolving horizontal arms fixed to a vertical post, allowing only one person at a time to pass through), which can count the number of people entering. The ticket taker drops the other half of the ticket stub into a locked box.

Required:

1. What internal control are present in the handling of the cash receipt by the cinema?   

2. What steps should the cinema manager take regularly to further improve these controls?   

Part b) ABC company has two employees handling purchases of supplies. One employee places purchase orders for supplies and pays the suppliers. The second employee receives the goods. Identify the principle(s) of internal control that is violated and recommend what the company should do to improve the internal control measures.   

Answer 1

A)

1) genarally internal controlls are of two types. preventive control and detective control. in the give case CITY CINEMA is applying preventive controls by checking each and every person separately and additonally with mechanical gate which counts number of persons who crossed the gate.

2) cinema managee can update  the ticket system to digital mode . so that allocation of tickets will be very easy . it will reduce the operation cost of electronic gate. because computer will count the number of persons and number of tickets.

B) placing order and making payment by only one employee will lead to mismanagement of cash and intentional fraud.