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
State and assess any two (2) possible risks associated with the accounting system for SMC Hotels LLC and state 1 control measure for each. ( In your Own Words)

Answer 1

Possible risks associated with the accounting system

Errors may occur in various categories for example, in recording income and expense. Some of these can directly affect the finances of the business, influencing the amount of cash available for expenses, eventually leading to problems even in day-to-day operations. Operations like management of cash flow and accounts receivables and payables are a result of diligent accounting and bookkeeping.

Mistakes in accounting and bookkeeping could be as small as forgetting to record a transaction or as big as missing out on recording critical entries for smooth tax filings. In reality, there is little room for errors, big or small, in accounting and bookkeeping.

Forgetting to record a transaction can quickly snowball into overdue payments, while mistakes in tax filings could affect business sustainability.

Solutions - Both are situations that can be avoided with judicious planning, Proper Accounting and Book Keeping, Proper Allocations of Expenditures in their respective accounting heads.