Question

R& V Hotel is consistently incurring losses for the past 2 years though the sales clerk receives customer orders, raises sales invoices at a higher price and processes payments for customers. Hotel customers have contracted prices, however online trade prices automatically loaded in to the system but the Brenda clerk used to amend manually. Mr. Zakariya an internal auditor found some deficiencies, who has taken some necessary actions to cross check those invoices and employees responsibilities and suggested the management immediately to prevent from loss of customers and good will of the hotel.
Based on the above scenario:
1. How the internal audit for R and V hotel can be helpful in resolving the issues they are confronting at the moment? Justify your answer practically
2. If you were Mr. Zakariya, prepare doable audit plan that Mr. Zakariya that you can use for the company and provide recommendations on how to overcome the deficiencies cited in the case?

Answer 1

Answer to 1

The Internal auditor should verify the Invoices with prices on the day of booking and the price charged in the invoice. Auditor should report to the management if any differences is found the same.

In the given case the sales clerk receives customers bookings, raises sales invoices at the higher price and processes payments for customers. Though the prices offered to customers for online bookings are automatically getting uploaded in the system but the clerk is amending it manually at the time of raising invoice. This process is not only hampering the business as a whole but also is resulting in the loss of goodwill to the company.

The auditor should report this to the management and guide the management to put control in the system that pricing cannot be altered. If this can't be done then the management should try to incorporate a process for fixing daily prices so that all the invoices should be made accordingly or starting to generate Invoice copy online so that the gap can be reduced to a certain level.

Answer to 2

In the given case the Internal auditor should:

1. Understand the Business and Business processes- In the given case, since it is a Hotel Industry the main source of revenue is through Room bookings and room services. Whereas the major expenses are maintenance, salary, electricity etc.
2. Reviewing prices- Since nowadays most of the restaurants are taking bookings online or putting their prices on websites, there may a gap arise if the online prices offered are different from that of the offline hotel bookings. The Auditor should incorporate a tool to reduce the gap between this pricing.
3. Invoice checking- the Internal auditor should thoroughly review the prices put on Invoices with the prices on which contractual bookings made by the customers.
4. Setting up Internal control- The auditor should set up Internal control at required levels so that the pricing difference does not happen.
5. Reducing costs- Since the Hotel is incurring losses from the last 2 years the Internal auditor should verify the costs of the organisation as it might be so that some costs are increasing and can be avoided.
6. Pricing control- Internal auditor should inform the management the reasons for pricing change whether Increased by the clerk or any other staff and proper arrangement should be made to reduce this.