Question

You have recently been appointed as an audit assistant for MKZ Auditing LLC, a popular auditing firm based in Al Ain. Your line manager spoke to you two weeks ago to inform you that you have been assigned to another senior auditing staff to undertake a visit and audit a client called SMC Hotels LLC.

Your line manager has tasked you to liaise with the senior auditing staff to prepare a presentation to be delivered to the senior management on how you propose to investigate and plan the audit of SMC Hotels LLC.

Required
Identify the appropriate control framework for SMC Hotels LLC( In your Own Words)

Answer 1

With respect to audit of SMC Hotels LLC, we have to plan for it with considering in mind about the Audit Risk Models which are Inherent Risk, Control Risk & Detection Risk and the plan is as follows: -

our Audit Steps are as

1. Review previous audit files and reports to become familiar with areas of concern.

2.As the audit progresses, review material exceptions or discuss with management are as that internal auditing is uncovering during the audit.

3.Conduct an informal pre-exit conference once all audit steps have been completed to ensure that management knows what to expect in the upcoming draft audit report.

4.Finalize all files and draft an audit report for review by the chief audit executive.

AUDIT OBJECTIVES

1.Determine that the hotel department and related functions are following company policies and procedures.

2.Determine that the company's hotel-related assets are properly safeguarded and accounted for.

AUDIT PROCEDURES

1.Review the hotel-related department's procedures manuals — such as thefront office, laundry, revenue audit — and discuss with the appropriate department personnel to determine if there are any areas of concern thatthey might have over the operations.

2.Complete the internal control questionnaire.

3.Complete the working papers stipulated in this audit program.H-1

AUDIT PROGRAM. FRONT OFFICE (Room Rates)

1.Obtain the most recent month's financial statements and management reports for hotel operations. Extract figures for monthly average occupancy, average room rate, and room revenue. Obtain explanations for material fluctuations from budget.

2.Obtain the updated hotel comparison analysis maintained by the hotel Manager and compare hotel performance with competitor and industry averages. Obtain explanations for material deviations for room rates and what is being charged by competitors for the same period. Determine whether management explanations are reasonable and attach a summary to the working paper.

3.Inquire how room rate maintenance is performed and updated in the front office reservation system, and how overrides are changed, controlled, and deleted. In summary form, prepare the observations and document observed control weaknesses in the working papers