You Are the Auditor for GreenAcres,a Non-Profit Home for Homeless

Essay

You are the auditor for GreenAcres,a non-profit home for homeless elderly.GreenAcres has a December 31 year end.It receives government funding and also relies on donations for revenue.GreenAcres has a major funding drive in November,when it collects pledges by means of activities at a garage sale,a walkathon,and bake sales in the community.
In late February you had a meeting with Ellen Famous,the President of GreenAcres,at the organization's premises.Ellen reviews and approves bank statements and is the second and final cheque signer.Two other accounting staff have the following responsibilities:
•Paul approves pledge write-offs (which normally average about 15%),opens the mail,endorses cheques received in the mail,prepares and delivers bank deposits,and posts transactions into the accounting system.
•Diana,a retired bookkeeper,volunteers about 10 hours per week to reconcile the bank account,review journal entries posted to the general ledger,and prepare payroll and accounts payable transactions for processing.
Ellen normally reviews pledge write-offs,but was very busy in February,so she took a look while you were there.To her surprise,she found that about 40% of the pledges had been written off.She asked Diana to investigate,and Diana found that most of the write-offs had actually been paid.
Required:A)What are possible causes of the inconsistency with the pledge write-offs? B)What are the weaknesses in internal control that could allow the excess write-offs to occur? Provide recommendations for improvement.C)Identify audit procedures that you would complete to quantify any potential misstatement with respect to the pledges receivable balance as at December 31.