An entrepreneur by the name of Francisco Fernandez recently entered into a new venture involving ownership...

 

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An entrepreneur by the name of Francisco Fernandez recently entered into a new venture involving ownership and operation of a small, 26-room motel and café. The motel is located in a remote area of southern Utah. The area is popular for tourists, who come to hike and mountain bike through the area's unique red rock terrain. Francisco has hired you to provide advice. Since Francisco lives in northern Utah, he hired a young couple to run the motel and café on a day-to-day basis and plans to pay them a monthly salary. They will live for free in a small apartment behind the motel office. The couple will also be responsible for hiring, supervising, and paying the four or five part-time workers who will help with cleaning the rooms, cooking, and waiting on customers in the café, etc. The couple will maintain records of rooms rented, meals served, and payments received (whether by cash, check, or credit card). They will make weekly deposits of the business's proceeds at the local bank. As the time approaches for the business to open, Francisco is concerned that he will have little control over the operations or records relating to the motel and café, given that the day-to-day control is fully in the hands of the couple. He lives almost five hours away, and will only be able to visit periodically. The distance is beginning to make Francisco a bit nervous. He trusts the couple he has hired, but has been around long enough to know that it is unwise to place employees in situations where they might be tempted. Francisco needs your help to identify possible ways his motel and café could be defrauded. He especially wants your assistance to devise creative internal controls to help prevent or detect fraud. REQUIRED (CONTINUED ON NEXT PAGE) [1] What are your two biggest concerns relating to possible fraud for the motel part of the business? For each concern, generate two controls that could effectively reduce risk related to your concerns. Use common sense and be creative! An entrepreneur by the name of Francisco Fernandez recently entered into a new venture involving ownership and operation of a small, 26-room motel and café. The motel is located in a remote area of southern Utah. The area is popular for tourists, who come to hike and mountain bike through the area's unique red rock terrain. Francisco has hired you to provide advice. Since Francisco lives in northern Utah, he hired a young couple to run the motel and café on a day-to-day basis and plans to pay them a monthly salary. They will live for free in a small apartment behind the motel office. The couple will also be responsible for hiring, supervising, and paying the four or five part-time workers who will help with cleaning the rooms, cooking, and waiting on customers in the café, etc. The couple will maintain records of rooms rented, meals served, and payments received (whether by cash, check, or credit card). They will make weekly deposits of the business's proceeds at the local bank. As the time approaches for the business to open, Francisco is concerned that he will have little control over the operations or records relating to the motel and café, given that the day-to-day control is fully in the hands of the couple. He lives almost five hours away, and will only be able to visit periodically. The distance is beginning to make Francisco a bit nervous. He trusts the couple he has hired, but has been around long enough to know that it is unwise to place employees in situations where they might be tempted. Francisco needs your help to identify possible ways his motel and café could be defrauded. He especially wants your assistance to devise creative internal controls to help prevent or detect fraud. REQUIRED (CONTINUED ON NEXT PAGE) [1] What are your two biggest concerns relating to possible fraud for the motel part of the business? For each concern, generate two controls that could effectively reduce risk related to your concerns. Use common sense and be creative!

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Internal controls refers to those mechanisms rules and procedures implemented by the enterprise to e... View the full answer