The Wellness Center is a nonprofit residential treatment center for mentally disturbed teenagers. You have been assigned to review the travel and entertainment account for this client. During your review, you find expenses related to the following items:
• A receipt for $12,800 for yacht insurance.
• A bill from a hotel in Chicago for $800 for cigars purchased during a convention.
• A receipt for $8,000 for a helicopter tour in Hawaii taken during a corporate meeting.
• A bill for $4,000 for golf lessons for the spouses and children of managers who were attending a training session held in Florida.
a. Describe how you would audit expenses listed in the travel and entertainment account.
b. Prepare several questions that you would ask management in regard to these expenses.
c. Describe the internal controls that could be in place to prevent or detect misstatements in the expense accounts. What internal control could be effective for travel and entertainment expenses for nonprofit companies?
d. Is your decision regarding internal control or the nature of these expenses different for a public company? Explain your answer.