Oceanview Hotel, a renowned establishment in a bustling coastal city, has recently been under scrutiny due to discrepancies in its financial statements. As an external auditor or a concerned stakeholder, you have noticed several red flags that hint at a potential accounting scam:

Unusual Revenue Increase: Despite a significant decline in tourism and a decrease in occupancy rates, Oceanview Hotel reported a substantial increase in revenue over the past quarter.

Inconsistent Expense Reporting: The hotel's reported expenses have fluctuated irregularly, with some costs unusually low for certain periods, followed by steep increases, without clear justification or correlation to hotel occupancy and activity.

Vendor Payments and Procurement Practices: The hotel has recently switched to new vendors for its supplies, bypassing the usual bidding process. Additionally, payments to these vendors are significantly higher than the market rates, as noted in the invoices.

Changes in Accounting Personnel: There has been high turnover in the hotel's accounting department. Experienced accountants have been replaced with relatively inexperienced staff.

Lack of Supporting Documentation: When asked for supporting documents for transactions, the accounting department has been consistently unable to provide adequate records. There are missing or incomplete records of receipts, purchase orders, and vendor contracts.

Discrepancies in Cash Flow Statements: The cash flow statements do not align with the revenue and expense trends. There are unexplained cash outflows and delayed deposit recordings.

Answer rating: 100% (QA)

Answer The red flags observed at Oceanview Hotel raise concerns about potential accounting irregularities and scams As an external auditor or concerne... View the full answer