Case Analysis please read the documents carefully. WWW.YORKVILLEU.CA 1 BUSI 3443 – ACCOUNTING CAPSTONE PROJECT – AUDITING Unit 11: Exam Part II: Cap

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Case Analysis please read the documents carefully. WWW.YORKVILLEU.CA

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BUSI 3443 – ACCOUNTING CAPSTONE PROJECT – AUDITING

Unit 11: Exam Part II: Capstone Integration Case

It is January 10, 2020. You, CA, live in the Peel region of southern Ontario and
your children attend one of the area’s private schools, Niagara Escarpment
Greenlands Collegiate (the school). The School is one hundred percent owned
by Mr. Calypso Orchid, who also acts as the School’s Headmaster. The School’s
volunteer council (the Council) is looking for a new Treasurer since the previous
Treasurer, another CA, resigned unexpectedly in December. The Council was
created in September 2019 to raise funds to pay for books and computers for
the new library that is expected to be completed in 2020. After speaking to the
Headmaster over the phone, you accept the volunteer Treasurer position.

You decide to meet with the Headmaster in person to determine what needs to
be done. When you arrive at his office, you find the Headmaster clearly upset.

“The Council meets each month, but I wasn’t able to attend any of the meetings
since I have been so busy this fall with the construction of the new library
building. The Treasurer kept promising to give me a statement of how much
money was raised, but the only financial information I received was a
statement of fundraising activities when she resigned. I just don’t understand
why the Council hasn’t raised more money given all of the fundraising initiatives
this fall. I thought we would have raised at least $20,000 by the end of
December.

“I would like you to review the profitability of the fundraising initiatives of the
Council and redraft the Statement of Fundraising Activities for any errors or
concerns you find.” The Headmaster hands you some background information
on the Council’s fundraising activities that he has summarized for you (Exhibit I)
and the Council’s Statement of Fundraising Activities provided by the Treasurer
(Exhibit II).

“I need to understand what is going on. I’m worried that the Council is going to
continue with a fundraising campaign that doesn’t generate any profit. Please
give me recommendations on what kind of information, both financial and
otherwise, I should be requesting from the Council to stay informed.

“In the fall, the Council accepted cash payments only. However, the School
received a number of complaints from parents about having to send cash to
school with their children. As a result, we have decided to move to a cashless
online system to collect all payments. The School has hired Parent Centre Inc.
(Parent Centre) to provide an online system for us. We have delayed the start
of any further fundraising activities until the new system goes live on March 1,
2020. Halton Hills Academy, a neighboring school, implemented Parent Centre’s

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system last year and had some problems. Therefore I need you to determine
whether appropriate controls are in place over the system before we go live. I
am particularly concerned about the confidentiality of parent and student
information.” He hands you a description of the proposed website (Exhibit III)
and some of the comments that the Principal of Halton Hills Academy had
emailed him (Exhibit IV).

“I almost forgot to tell you something. The Council has its own bank account
and I just received the December 2019 bank statement. The account balance
was $11,400 at the end of the year but the statement of fundraising efforts
shows a net profit of $12,442. The Treasurer said that all deposits had been
made and I know that there is no cash left in the school office. What can be
done to figure out where this extra cash went? Can you or someone else
conduct an investigation to see what has happened and explain to me what
work would be involved?” You decide to draft a report to the Headmaster
addressing his concerns.

EXHIBIT I Information on the Council’s Fundraising Activities

One of the key objectives of the Council is to initiate and oversee fundraising
activities throughout the school year to generate funds to purchase library
books and computers. The Council oversaw the following fundraising activities:

Milk Days

During the first week of school, the Council offered a daily milk program to the
School’s 620 students, whereby a student would receive a 250 ml carton of 2%
white milk or 1% chocolate milk at lunch time on each school day. The Council
negotiated a purchase price of $0.40 per carton with a local grocery store,
Bruno’s Food Port, based on an expected enrollment of 300 students in the milk
program.

Parents had to sign up their students for the entire school year at a weekly
price of $2.50 for 40 weeks (which takes into account PD days and March
Break). The payment for the entire school year was submitted with a sign-up
form and dropped off at the School’s main office. Based on the sign-up forms
collected, 60% of the School’s students enrolled in the program. The office
remitted all of the collected funds to the Treasurer. A cheque was issued to
Bruno’s Food Port on October 1, 2019 to pay the entire purchase price for the
school year.

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Pizza Lunches

Beginning in September, the Council offered pizza lunches to students on the
first Tuesday of each month and on the last Friday of each month. Students
could choose from the following options:

• 1 slice for $2.00, either cheese or pepperoni
• 2 slices for $3.50, either cheese or pepperoni

The Council initially estimated that 40% of students would participate on each
pizza day, of which 50% of students would choose the one slice option. The
Council planned to order extra-large pizzas with 10 slices at a cost of $16 per
pizza from Antonello’s Pizzeria.

Unfortunately, Antonello’s Pizzeria went out of business before the first pizza
day and the Council instead purchased from Little Brutus’s at a cost of $17 per
10 slice pizza. Pizza slices were distributed at a central location in the school.
The cash was collected by Council volunteers on each pizza day and then
remitted to the Treasurer. A cheque for the pizzas ordered was issued to Little
Brutus’s on each pizza day.

In December, a Council volunteer tallied all the orders and noted that a total of
550 pizzas were ordered from

September to December. On average, 420 students had participated in the
program on each pizza day, and 60% had chosen the one slice option. She
commented that there were often extra slices at the end of pizza day that were
not sold because the right number of cheese or pepperoni pizzas were not
ordered.

Pumpkin Drive

The Council partnered with a local farm, Chudleigh’s Farm (CF), to sell pumpkins
in the month of October. Students could sell large pumpkins for $7, medium
pumpkins for $5 and small pumpkins for $3. CF agreed to charge the Council $5
for large pumpkins, $4 for medium pumpkins and $3 for small pumpkins.
Students accepted cash for payment and then remitted the amount to their
teacher with their order form. Each teacher submitted a summary order form
and all of the monies collected were remitted to the Treasurer.

At the time of invoicing, CF decided to donate the small pumpkins at no cost
because the School’s students had sold so many large and medium pumpkins.
Based on the invoice received from CF, the number of pumpkins delivered to
the School was as follows:

• Large – 870
• Medium – 615
• Small – 375

A cheque was issued to CF on December 1, 2019.

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Garbage Bag Sales

In November, the Council held a garbage bag fundraising campaign through a
program with Poly Bag Central

(PBC).

Each student was given a brochure from which consumers could select garbage
bag products to purchase.

Students collected cash at the time of ordering and then submitted the funds
with their order envelope to the

School’s main office. Once all the forms were collected, the Council sent the
order forms to PBC and the Treasurer collected the cash. Teachers collected
envelopes from 470 students and a total of 1,830 rolls were sold. A cheque was
issued to PBC on December 15, 2019 to pay for the rolls sold.

The following items were offered in the brochure:

Item Description Dimensions

(Width x Length)

Number of
Bags per Roll

Selling Price
per Roll

Cost per
Roll*

Compostable Bags 41 cm x 42 cm 30 $12 $7.60

Kitchen Bags 50 cm x 53 cm 50 $12 $7.60

Large Garbage Bags 76 cm x 83 cm 20 $12

$7.60

* PBC offers free freight on minimum orders of 1,200 roll packs, otherwise
an additional $1.40 is charged per roll.

Student Pictures

In early December, Picture Perfect Imaging (PPC) visited the School and took
pictures of each of the 620 students. Parents were offered the following picture
packages for purchase:

• Package A – $45
• Package B – $38
• Package C – $30
• Package D – $25
• Package E – $10

Each homeroom teacher collected the cash payments from the students and
then submitted a summary form of packages ordered and the money collected
to the Treasurer. The agreement with PPC required that the School submit a
payment equal to 95% of total sales and keep a 5% commission. However, if

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more than 90% of students purchased pictures, the School would only have to
submit 80% of total sales and the commission increased to 20%.

Based on the summary forms prepared by the teachers, the following numbers
of packages were purchased:

• Package A – 190
• Package B – 145
• Package C – 80
• Package D – 120
• Package E – 40

In late December, a cheque was issued to PPC to pay for the packages
purchased.

EXHIBIT II

Statement of Fundraising Activities Supplied by the Council Treasurer

Niagara Escarpment Greenlands Collegiate Council

Statement Of Fundraising Activities

For the four months from September 1, 2019 to December 31, 2019

Fundraising Revenue

Milk Days (note 1) $ 30,000

Pizza Lunches (note 2) 5,456

Pumpkin Drive (note 3) 9,300

Garbage Bag Sales (note 4) 11,904

Student Pictures (note 5) 18,352

75,012

Fundraising Expenses

Payment to Bruno’s Food Port (6) 24,000

Payment to Brutus’s Pizzeria (note 7) 4,768

Payment to Chudleigh’s Farm (note 8) 7,440

Payment to Poly Bag Central (note 9) 8,928

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Payment to Picture Perfect Imaging (note 10) 17,434

62,570

Net Profit $ 12,442

Calculations supporting fundraising revenue and expense amounts:

1. Expected number of students to enroll of 300 x 40 weeks in the school year x
weekly price of $2.50 = $30,000

2. 620 students x 40% x 50% x $2 for 1 slice x 2 days per month x 4 months =
$1,984 620 students x 40% x 50% x $3.50 for 2 slices x 2 days per month x 4
months = $3,472 Total = $5,456

3. Assume equal number of each size of pumpkin will be sold by each student.
Average sales price = ($7 for large + $5 for medium +$3 for small) / 3 = $5
1,860 pumpkins sold x $5 per pumpkin = $9,300

4. 620 students x expected participation rate of 40% x 4 rolls each x selling price
$12 = $11,904

5. Equal distribution of students purchasing each package (620 students / 5
packages = 124)

• Package A – $45 x 124 = $5,580
• Package B – $38 x 124 = $4,712
• Package C – $30 x 124 = $3,720
• Package D – $25 x 124 = $3,100
• Package E – $10 x 124 = $1,240
• Total = $18,352

6. Expected number of students to enroll of 300 students x 40 weeks in the
school year x 5 days per week x $0.40 cost per carton = $24,000

7. 620 x 40% x 50% x 1 slice x 2 days per month x 4 months = 992 slices 620 x
40% x 50% x 2 slices x 2 days per month x 4 months = 1,984 slices. Total slices
= 2,976 / 10 slices per pizza = 298 pizzas x $16 per pizza = $4,768

8. Average cost = ($5 for large + $4 for medium + $3 for small) / 3 = $4. 1,860
pumpkins sold x $4 per pumpkin = $7,440

9. 620 students x expected participation rate of 40% x 4 rolls each = 992 rolls
10. 992 rolls x (cost of $7.60 + freight of $1.40) = $8,928

11. Payment to Picture Perfect Imaging equal to 95% of total sales ($18,352 x
95%) = $17,434.

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EXHIBIT III Description of the Proposed Website

The Parent Centre is an easy and secure website for parents and guardians to
pay school-related fees from the convenience of their homes. The system has
the following benefits:

• Credit card payments can be made online 24 hours a day, 365 days a
year.

• No more sending cash to school with students, where it can be lost or
stolen.

• Online resources, including downloadable permission forms, purchase
receipts and payment history, are available.

The Principal and the school secretary will be set up as the website
administrators. The website administrators can make changes to the student
information in the system, correct email addresses, and change the bank
account information, The Parent Centre website will use an external provider,
CreditCheck, to process credit card payments. At the end of each week, the
website will submit a list of all payments and credit card information to
CreditCheck for processing via email. The website administrators may also do
this more frequently, although the information would need to be downloaded
and submitted manually via email. The website provider will receive a weekly
report from CreditCheck that lists all of the transactions processed.

The Parent Centre website is extremely user-friendly with minimal work
required to get the site online and running by March. To use the site, parents
will need to follow four easy steps:

Step 1: Profile Set-up

All users will need to register by setting up an online profile. The first step is to
access the Parent

Centre website, enter the user’s email address and a login password. After
completing these two fields, the user account becomes active and they will then
be directed to the Account Set-up page.

The email address and password input will be used to log into the site after the
parent has registered. This email address will also be used to contact the user
when his or her account reaches a predetermined ‘low balance’ and to email
the user information regarding online resources.

Step 2: Account Set-up

The next step is to create a student account by entering in the student’s first
and last names. If there are multiple students with the same name at the
School, the website will list those students with their addresses and dates of

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birth to allow parents to select the correct student. This list will only be
available to users who have created an account on the website.

Step 3: Deposit Funds

In order to deposit money into a student’s account, users will need to enter
their credit card information

(e.g., cardholder’s name, credit card type, credit card number, credit card expiry
date) and the amount to be deposited into the student’s account. The student’s
account will automatically be updated to reflect the amount of the deposit and
will be available for immediate use.

Step 4: Pay for Fees

To pay for school fees online, the user will click on ‘Shopping Cart’ and then
select the applicable item (e.g., pizza day). For each fee selected, the user will
enter the amount to be paid. Users can select multiple items and then click on
‘Checkout Shopping Cart’. The system will only allow a user to checkout if there
are sufficient funds in the student’s account. The system will ask the user to
confirm the payment prior to processing the transaction.

EXHIBIT IV Comments from Principal of Halton Hills Academy

Calypso Orchid

From:

Sent: January 3, 2020

To: Calypso Orchid

Subject: Comments on the Parent Center system

Importance: High

Overall Halton Hills Academy was very pleased with the Parent Centre system.
The system was easy to set up, as we simply uploaded an excel sheet with the
students name, address, and date of birth.

The system allows you to send out a broadcast email to all registered users
which was done last month, however, a number of these emails were not
received by the parents as their email addresses had been entered incorrectly.

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There has been a significant delay in receiving payment from CreditCheck
usually due to a credit card expiry date being entered in the wrong format or
incorrectly.

EXHIBIT I Information on the Council’s Fundraising Activities
EXHIBIT I Information on the Council’s Fundraising Activities
Milk Days
Milk Days
Pizza Lunches
Pizza Lunches
Pizza Lunches
Pumpkin Drive
Pumpkin Drive
Garbage Bag Sales
Garbage Bag Sales
Garbage Bag Sales
Student Pictures
Student Pictures

Statement of Fundraising Activities Supplied by the Council Treasurer
Statement of Fundraising Activities Supplied by the Council Treasurer
EXHIBIT III Description of the Proposed Website
EXHIBIT III Description of the Proposed Website
EXHIBIT III Description of the Proposed Website
Step 1: Profile Set-up
Step 1: Profile Set-up
Step 2: Account Set-up
Step 2: Account Set-up
Step 3: Deposit Funds
Step 3: Deposit Funds
Step 4: Pay for Fees
Step 4: Pay for Fees
EXHIBIT IV Comments from Principal of Halton Hills Academy
EXHIBIT IV Comments from Principal of Halton Hills Academy

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