Question

The Allure is a high-end casino in Las Vegas that caters to wealthy patrons. Minimum bets for

table games range from $100 to $500 a hand. Pit managers supervise game play from podiums in

the pit (i.e., in the center of two rows of table games facing outward as shown below). Since thorough background

checks are performed when pit managers are hired, the casino didn’t install hidden surveillance

cameras above the pit.

At the Allure, to incentivize continued bets by patrons, pit managers have the authority to issue

markers. Markers are very short-term loans of cash generally made to patrons who are betting

significant amounts of money. The pit manager will prepare the marker document (including the

amount) and scan the patron’s driver’s license. The scan of the driver’s license is sent

electronically to the accounts receivable department. The pit manager will then have the patron

sign the marker before exchanging it for casino chips (example below). Casino chips represent cash

when placing bets at table games.

The Allure’s markers have two copies. One copy is given to the patron along with the casino

chips, and the second copy is sent directly to the accounts receivable department. The accounts

receivable clerk will then match the patron’s information on a printed copy of the scanned

driver’s license with that on the marker before recording it. Both documents are then filed

together in the accounts receivable department.

Consider only the above scenario about the Allure. Identify and discuss: a) two important

preventative/detective controls missing over the Allure’s processes as described above and b) the

objectives that would be achieved if the controls you identified were in place and effective. In

your discussion, justify your categorization of each internal control as preventative/detective.

Answer 1

a) The two controls missing in Allure's process discussed above are :

• The amount that is being recorded by the clerk after matching the documents can be recorded wrong sometimes that would disturb all the calculations and records. So a system must be made that would immediately detect the wrong amount being mentioned in accounts receivables.
• All this process include the involvement of only the accounts receivables department and the manager is self keeping no records with them as a proof. So, this would later on cause problems if the accounts receivables clerk wish to do some fraud. So to prevent this situation, the manager should also sign the allure for granting loan and keep a copy with them too. This would prevent clerks from committing fraud as managers would anytime check the recorded amounts with their own records they are having.

Now we saw the two controls which were missing in the system. And they are clearly classified which one is detective control and which one is preventive control.

b) The objective which would be received after applying these controls properly are :

• The first control mentioned was the detective control of establishing a system to detect the wrong entry of amounts in accounts receivables section. The objective behind this is to have a clear and right reporting of the aoumts so that there is no mistake in the accounts recorded. If there occurs some by mistake, the system would immediately reflect that and this would be rectified easily.
• The second control is the preventive control whose objective is to reduce the fraud that might be committed by employees as the manager was self keeping no records of the transactions. Thus, keeping records with manager and running a regular check on the clerks works, would help prevent fraud situations.