1) Hong Kong's HarbourView hotel prepares monthly bank reconciliation statements

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1) Hong Kong's HarbourView hotel prepares monthly bank reconciliation statements. You have collected the following information in connection with preparing Harbourview's 31st December 20X1 bank reconciliation:

1.  The bank account record maintained in Harbourview's double-entry accounting system has a 31st December 20X1 debit balance of $33,376 (this is after the hotel's record of receipts and payments for the month have been recorded in the account).

2.  Bank statement balance on 31st December 20X1 is $34,290 credit.

3.  Receipts for 31st December totaling $1,240 have been recorded in Harbourview's books, but have yet to be deposited at the bank.

4.  Cheques issued by the hotel that has not cleared the bank as of 31st December total $2,170.

5.  The bank statement indicates that the HarbourView account has been charged with fees of $32 during December.

6.  The 31st December bank statement indicates the interest of $16 has been credited to the HarbourView account during the month.

 

HarbourView hotel's 31st December 20X1 bank reconciliation statement.

 

2. Following your recent appointment to the CrownTowers hotel group internal audit department, you have been assigned to conduct an internal control analysis of the Kuala Lumpur CrownTowers hotel. A year ago, the hotel appointed a new General Manager who immediately changed several of the hotel's systems. He justified these changes on the basis that cost savings could be achieved through more streamlined procedures. In the course of describing some of his cost-cutting initiatives, the General Manager tells you:

When I arrived I found some arrangements that really were unnecessarily complex. Two areas I've streamlined relate to cash management and purchasing. With respect to cash management, I'm now reaping economies of scale by having one person take care of collecting cash, banking the money collected, and recording the deposits in our accounting system. This is saving time and energy, as we don't need to keep passing information from one person to another. Similarly, with respect to purchasing food items, I now have one person placing our purchase orders. To save on frustration and miscommunication with information being passed around, I get the same person to do a check that the goods ordered have all arrived in good condition. Once he's satisfied that the delivery is in order, he then authorizes the supplier's payment.

 

Outline any internal control shortcomings that you see in the system changes made by the new General Manager of the Kuala Lumpur CrownTowers hotel.

 

3. Steve Fitchett has been managing the Kenyan SafariCamp hotel's souvenir and camera supplies shop for 11 years. Sue Rodwell, who acts as a shop assistant, operates the cash register and records the daily takings on a cash receipts form that she signs and gives to Steve. As this is a relatively small shop, Steve performs most of the shop's management functions including preparing bank account deposit documentation and preparing the shop's monthly bank reconciliation statement. Stock in the shop is reordered by Steve when items appear low, as no ongoing account of the items held in stock is maintained. The stock balance is determined at the end of the year by way of a stock count, conducted by a member of the accounts team.

Identify and describe any internal control shortcomings you see in this SafariCamp hotel shop scenario.