Question

Michael Wilson entered into a new business, hotel ownership, by buying a small 24 room hotel and café. The hotel is located in a remote area of Minnesota that is popular for tourists. Michael has hired you for advice.

Michael hired a young couple to run the hotel and café on a daily basis and plans to pay them a monthly salary. They will live for free in a small apartment adjacent to the office. The couple will be responsible for hiring and supervising five part-time personnel who will help with cleaning the rooms, cooking, waiting on customers in the café. The couple will maintain records of rooms rented, meals served, and payments received. They will also make weekly deposits.

Mike is concerned about his lack of control over the records and operations. Mike lives 5 hours away and will only be able to make periodic visits. Mike trusts the couple but wonders if it makes sense to place so much trust in employees.

Mike needs your help to identify possible ways that his motel and café could be defrauded and especially wants assistance to devise creative internal controls to help prevent or detect fraud.

Required

1. What are your two biggest concerns related to possible fraud for the hotel part of the business.   For each concern describe two controls that could reduce the risk.
2. What are your two biggest concerns related to the café part of the business. For each concern describe to controls to reduce risk.

Answer 1

For any entrepreneur it is significant for himself to be available in the underlying tasks of any new business. Anyway Mike has made it extremely certain that he might probably make intermittent visits so as his consultant the principal thing that I might want to reveal to him that he should make increasingly occasional visits to the lodging and bistro. Eg. On the off chance that he intends to visit it once ,he should visit the inn twice and a few times thrice in seven days.

My two greatest concerns identified with conceivable misrepresentation for the inn are:

1).The employees filling in just as the couple working may not be reliable and might need to procure cash without Mike's assent. They may lie about the quantity of visitors that have arrived or even they may charge high or low rate from the client and do exclude it in their charging, the clients who get rebate from them will be more than glad and will never report any such misrepresentation by the couple.They will probably win a great deal of cash out of this extortion and upon enquiry by Mike they may report that there were less visitors/clients who went to the inn and hence they have not had the capacity to create enough cash to send it to Mike.

2).The second thing that I am worried about it are the administrations ,tidiness and the nourishment that the couple and different employees may display for the clients. As it isn't their inn or bistro they probably won't deal with it as their own, they may feel that Mike will pay them their month to month compensation and they don't have to endeavor any additional endeavors to fulfill the client as it would not have any effect on their pay. This may result in filthy bed rooms just as bed sheets and toilets, chaotic introduction and planning of sustenance and not legitimately welcome and demonstrating undesirable demeanor to the clients.

So as to control every worry following advances can be taken :

1)Insalation of Closed-Circuit Television(CCTV), with the assistance of this progression Mike can without much of a stretch screen the exercises being done in the inn remotely through his versatile and this will make the workers feel that they are being viewed and along these lines anything or any kind of extortion can adversary affect them. This will shield them under check from commiting any false exercises.

2).For the second concern Mike can give different diverse sort of impetuses to them by diminishing a little level of their compensation and giving them benefits that may inspire them to acquire more and work for the improvement of the lodging and bistro. Mike can for instance give the couples impetuses or a level of benefit on each effective remain of the clients gave that the clients notice that they are content with the administrations being given to them. He can likewise request that they click a picture,and send it to him, at any arbitrary day of the room also the toilets to him while holding that days paper close by with the goal that it is confirmed that the image is of the asked day and date.

Bistro as a rule give nourishment to the general population. When someone enjoys the flavor of a specific gourmet expert in a specific bistro he generally endeavor to locate a similar preference for that bistro every time he visits. The significant worries that I have with the bistro are:

1).Unsatisfied clients, in some cases there is extraordinary surge in the bistro and individuals may think that its exceptionally hard to hold up persistently in ques and might need to get inside have their feast at the earliest opportunity, how the couple will deal with the ques is a noteworthy worry as though the clients are not happy with that they get in administration they will in the end stay away forever and do negative exposure about the bistro and this will eventually influence the income age of the bistro.

2).The second significant worry about the bistro is if the cook who makes the nourishment is sick or the cook isn't content with the couples behaviours he may leave the bistro and work elsewhere. Individuals now a days like to have tranquility in their life instead of pressure and cash, the cook may work some place at lower compensation however when individuals come to think about the taste and value his cooking he will eventually procure more. The cook may likewise leave if the couples don't pay his pay on schedule and furthermore give him less pay than what he merits.

So as to defeat these worries the accompanying measures can be taken:

1).Appropriate stimulation in the bistro also outside the bistro can be masterminded precedent decent and mitigating music can be played inside just as outside the bistro. Couples holding up in ques can likewise move in that light music and legitimate lighting can likewise be organized. Make the general population as glad as could be expected under the circumstances and furthermore give them different advantages, for example, markdown coupons for their following visit. Glad clients are the way to progress for any business/bistro/inn.

2).There ought to dependably be back up for the fundamental gourmet specialist and he ought to be promptly accessible as and when required by the bistro. Mike can likewise guarantee that every one of the compensations are scattered by him straightforwardly to the ledgers of the employees and eleminating the couple to convey pay. In that manner individuals will even now have enthusiasm for Mike as he is the one that really pays pay to everybody. In the event that this happens anybody will probably identify and report of extortion in the bistro as employees won't be terrified that their pay rates can be deducted.