Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

Torstar‟s Heaven is star level hotel situated at Nagarkot. During the initial discussion it is noticed that the hotel management is aware of pilferage issues, however due attention is not paid to address the situation. You are required to express your statement underlying the importance of internal control on the pilferage issues and the probable consequences of it, if not addressed properly.
Pilfering is one of the greatest problems in any hotel and the importance of internal control cannot be over stressed. It is the responsibility of the management to introduce controls, which will minimize the leakage as far as possible. If the internal control in the hotel is weak, then a very serious problem exists for the auditor. Preparing accounts at regular interval for each of the cost/ revenue centers and investigating the deviation if any could be helpful in this regard. If necessary, scope of audit tests will have to be increased and in the event of material margin discrepancy being unexplained, the auditor may consider qualifying his report.

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