Joseph Gonzales recently bought a new business that included a small 20-room motel and coffee shop. He hired a young couple to run the business and plans to pay them a monthly salary. The couple will live for free in a small apartment behind the motel office and will be in charge of the daily operations of the motel and coffee shop. They will also be responsible for hiring and supervising the four or five part-time employees who will help with cleaning the rooms, cooking, and waiting on customers in the restaurant. The couple will also maintain records of rooms rented, meals served, and payments received (which can be in the form of cash, checks, or credit cards). They will make weekly deposits of the business’s proceeds at the local bank. Joseph lives about six hours away and will only be able to visit periodically.
1. What are your two biggest concerns about possible fraud on the part of the couple?
2. For each concern, identify a possible control that could reduce the risk of fraud.