Question

1. A company comprises a chain of 137 restaurants. All food orders for each restaurant are required to be entered into an electronic device that records each food order by food server and transmits the order to the kitchen for preparation. Food servers are responsible for collecting payment for all of their orders and must turn in the proceeds collected (cash, checks, and credit card receipts) at the end of their shift, which should equal the total sales value of food ordered for their ID number. The manager then reconciles the payments received for the day with the computerized record of food orders generated. All differences are investigated immediately by the restaurant manager or assistant manager. At the end of each day, the cash and checks, less a standard amount of cash kept for use the next day, are deposited in a corporate bank account. Credit card receipts are directly credited to the corporate bank account by the credit card provider.
   
   Corporate headquarters wants to establish monitoring controls to determine whether each individual restaurant is recording all of its revenues and transmitting the applicable funds to corporate headquarters. Design a monitoring control that would achieve this control objective.

Internal auditing: assurance & advisory services 4th edition

Answer 1

Internal control established in Restaurant business to monitor following activities like

Cash – One of the important area to establish control It is essential to pay close attention to the number and ensure that everything accounted correctly

Most important is to do reconciliation between reports from point of sale , bank deposit which help to catch any possible misstatement .

Limit and establish authorization system with the ability to sign checks on behalf of business

Random cash verification , petty cash position , Bank reconciliation is most important internal control on cash

Store monitoring – another important area to look into by manager . Manger has to maintain Inventory and keep a track on vendor payment .

Account payable is a very common area of fraud because employee in their position could potentially set up a fictitious vendor and misappropriation of cash

Inventory reconciliation , closing stock of material , correctly valued of inventory – closely monitor by manager to ensure all records match up with actual movement

Access control – to ensure that each employee has specific access rights based on their position .

Finally review Financial statement –ensure that all journal entry has been posted, reconcile with ledger balance and financial statement provide true and correct view