problem 1) DREAM LAGOON HOTELS
Dream Lagoon Hotels is the listed company that runs a chain of some 50 hotels. The company has established internal audit department which is based at the head office and that makes regular visits the hotels. The hotels provide business and tourist class accommodation. They also provide restaurants, bars, and conference and leisure facilities that are open to the general public as well as residents. The company operates computerized central booking and billing system and an inventory and asset control system, both of which can be accessed using terminals in the hotels. Access to the system is restricted by the use of password and all major expenditure is authorized through the head office. The payroll is operated through head office. Hotel and regional managers are actively involved in the setting of budget and cash flow forecasting. On average, throughout the year, the chain has a 65% occupancy rate.
a) describe the function of internal audit in ensuring that organization achieves their corporate objectives.
b) Analyse the types of activities normally carried out by internal audit department
c) describe six areas in which the internal audit department at Dream Lagoon Hotels might check detailed transactions and balances.
d) describe FOUR areas in which the internal audit department at Dream Lagoon Hotels might perform reviews of the systems or operational performance.
problem 2) INTERNAL CONTROL AND CASH
a) Internal control systems are designed, amongst other things, to prevent error and misappropriation.
a) describe the errors and the misappropriations that may occur if the following are not properly controlled:
i. Receipts paid into bank accounts;
ii. Payment made out of bank accounts;
iii. Interest and charges debited and credited to bank accounts
b) The external auditors of companies often prepare to companies’ bankers asking for details of bank balances and other matters at the year-end.
a) Describe why auditors prepare to companies’ bankers and list the matters you would expect banks to confirm.