Establishing Effective Internal control in a Small businessA longtime client, Salim Ali, recently entered into a new ventureinvolving his ownership and operation of a small 20-room moteland café' located in an area of Al-Qurum-Muscat heavily visitedby tourists. He needs your advice.Salim hired a young couple to run the motel and café' on a day-to-day basis and plans to pay them a m0nthly salary. They willlive for free in a small apartment behind the motel office andwill be in charge of the daily operations of the motel and café'.The couple will be responsible for hiring and supervising thefour or five part-time personnel who will help with cleaning therooms, cooking, and waiting customers in the café'.etc. thecouple will also maintain records of rooms rented, mealsserviced, and payments received (which can be in cash, checks,or credit cards). They will make weekly deposits of the businessproceeds at the local bank.As the time approaches for the business to open, Salim isconcerned that he will have a little control over the operations orrecords relating to the motel and Café', given that the day to daycontrol is fully in the hand of the couple. He lives more than fivehours away in Muscat and will be able to visit periodically. Hetrusts the couple he has hired, but he has been around longenough to know the placing employees in situations where theymight be to do wrong or in unwise.Salim needs your help in identifying possible ways his moteland café' could be defrauded. He especially wants yourassistance in identifying creative internal controls to helpprevents or detect fraud.Requirements1. What are your two biggest concerns relating to possible fraudon the part of the couple for the motel business? For eachconcern, generate two or three controls that could be effectivelyreduce risk related to your concerns.2. What are your two biggest concerns relating to possiblefraud on the part of the couple for the café' business? For eachconcern, generate two or three controls that could be effectivelyreduce risk related to your concerns.3. Describe the impact each proposed control on would have onthe efficiency of running the business. Are the control yougenerated both effective and efficient?

Internal control refers to the process of exercising or implementing planned activities, rules, or…

Establishing Effective Internal control in a Small business A longtime client, Salim Ali, recently entered into a new venture nvolving his ownership and operation of a small 20-room motel nd café' located in an area of Al-Qurum-Muscat heavily visited y tourists. He needs your advice. Salim hired a young couple to run the motel and café' on a day- o-day basis and plans to pay them a m0nthly salary. They will ive for free in a small apartment behind the motel office and vill be in charge of the daily operations of the motel and café'. The couple will be responsible for hiring and supervising the

Establishing Effective Internal control in a Small business A longtime client, Salim Ali, recently entered into a new venture nvolving his ownership and operation of a small 20-room motel nd café' located in an area of Al-Qurum-Muscat heavily visited y tourists. He needs your advice. Salim hired a young couple to run the motel and café' on a day- o-day basis and plans to pay them a m0nthly salary. They will ive for free in a small apartment behind the motel office and vill be in charge of the daily operations of the motel and café'. The couple will be responsible for hiring and supervising the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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