Sunshine Center: an Instructional Case

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ISSUES IN ACCOUNTING EDUCATION Vol. 25, No. 4 2010 pp. 709–720 American Accounting Association DOI: 10.2308/iace.2010.25.4.709 Sunshine Center: An Instructional Case Evaluating Internal Controls in a Small Organization Sandra K. Fleak, Keith E. Harrison, and Laurie A. Turner ABSTRACT: Management and auditors face increased responsibilities to evaluate internal control and assess the risk of fraud. This case provides the opportunity to evaluate internal controls and the possibility of fraud in a very small not-for-profit child care center, a setting that is easy to understand. The first goal of the case is to identify internal control weaknesses by applying the COSO internal control framework in an environment that lacks many…show more content…
Recent Operations Presently, the Sunshine Center facility accommodates a maximum of 20 children at one time, although more children enroll and attend part-time. Sometimes, especially during school vacations, daily attendance is less than 20. Hours are from 7:00 a.m. until 6:00 p.m. each weekday, with lunch and snacks provided for the children. The fee is $85 per week per child, with payment due at the beginning of each week. However, fee payments often trickle in during the week as the services are provided. Each day, three employees operate the Sunshine Center—the salaried director, one full-time employee, and one part-time employee. The Sunshine Center Committee In the past, the Sunshine Center Committee met once each month. At each meeting, Barb gave a brief description of monthly activities, including the theme of decorations, games, and activities, but she never presented a financial report. Whenever Committee members questioned the lack of a budget and financial information, Rev. Andrew always replied, “This is a ministry, not a business.” Asserting that there were no financial problems, Rev. Andrew frequently pointed out, “The Sunshine Center fulfills a real community need.” Further, he emphasized that as a church member, Barb could be trusted. In response, Committee members dropped their request for financial information. As

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