EXIT CONFERENCE

Auditors:
1. Noc -Auditor
2. RJ -Auditor
3. Stewart -Auditor
4. Ochea -Auditor

Management:
5. Patty – Management 1
6. Katt – Management 2
7. JP – Management
8. Kleah – Management
9. Christine – Management
10. Mary – Management
11. Lindsey –Management

1. Introduction

2. 1st audit finding

Auditor 1: When the audit team visited the company and conducted an audit of the
company’s cash account, we found out that cash receipts are not deposited to the bank
daily. They are kept in a cash vault in each branch and are only deposited every
Monday of the week.

Auditor 2: And from our study of your company’s policy, it stated that all cash
receipts should be deposited intact daily or on the next banking day.

Management 1: Sir, regarding with that observation that cash is deposited every
Monday only, the company’s depositor for all branches, Mr./Ms._____, is only
available during Mondays, which is the only day collections are deposited in the
bank.

Auditor 3: We see. But Sir/Mam, if you continue keeping cash in a vault in each
branch, it makes it susceptible to theft, which will ultimately lead to cash shortages.

Management 2: We thought of convenience in depositing our cash receipts. But

okay, we will take note of this concern. Do you have any recommendations to solve
this issue?

Auditor 4: We suggest that the company should make agreements with the banks or
any third party depositor companies to pick up the cash collections in each branch
daily. This would lessen the chance of theft as cash are deposited daily to the banks.

Management 3: Okay Sir, thank you, we will take note of that.

3. 2nd audit finding

Auditor 1: Still with regards to our audit of your cash, we have observed that your
company’s cash receipts from a particular branch are commingled with collections
from other branches before depositing them. The amount indicated in the bank
deposit slip is the total amount of cash receipts from all the branches and are
deposited together in one account.

Management 1: As what we have mentioned a while ago, our company has only one
depositor, Mr./Ms. _____, who collects the cash receipts from all branches and
deposits them in the bank every Monday. Also, all branches have only one bank
account where collections are deposited.

Auditor 2: But as you can see Sir/Mam, cash receipts from different branches need to
be deposited in different bank accounts. Branch deposits should not be commingled
with the deposits of other branches to maintain proper documentations.

Management 1: Argue
Management 2: Argue
Management 3: Argue

Auditor 3: Sir/Mam, that procedure will cause difficulty in determining actual cash
deposits per branch. There would also be possibility of lack of cash deposit
documentations and loss of an audit trail.

Management 4: Reason out

Auditor 4: That is why in order to solve this problem and to reduce the possibility of
those negative effects and outcomes; we recommend that each branch should have its
own bank account separate from the bank accounts of other branches. The company
should also have more than one depositor or have an agreement with banks to pick up
the collections in each branch. With this, proper bank reconciliation for each branch
can be done for control purposes.

Management 5: Seems reasonable. Thank you for that proposal and we will make
sure to be able to take proper action for this.

4. 3rd audit finding

Auditor 1: Moving on, during our audit of your company’s point-of-sale system, we
have discovered that your company does not maintain the point-of-sales deletion
reports for more than ten days. Other than the deletion reports ten days prior, there is
no other way to know past deletion reports of the POS system.
Auditor 2: And also, do you know that deletion reports of the POS system in each
branch should be documented and kept for years until deemed useless by auditors?

Management 6: Defend

Management 7: Support

Auditor 3: Even though the company knows that deletion reports are automatically
deleted from the POS system after ten days, management did nothing about because
deletion reports take so much space in the system and it may overcrowd it.

Management 7: That is exactly one of the reasons why we delete them after 10 days!

Auditor 4: We understand your point Sir/Mam. However, not maintaining the

deletion reports prevents them to be reviewed. The manager of the branch, which is
the only person in a branch authorized to delete and cancel orders from the POS
system, can easily delete orders and pocket cash receipts. This can ultimately go
undetected for a time period.

Management 1: Hmm. This actually makes more sense now! I wonder why we
haven’t thought of this since before. What if some managers may have already
committed such fraud! Also, I believe that it is important to keep deletion reports for
a longer period. We never know the turn of events and circumstances around us.

Management 2: I agree. (To the auditors) Thank you for raising such issue. We never
took this into consideration. So what do you propose that we should do?

Auditor 1: I appreciate your realization regarding this matter. Because the POS
system of each branch is connected to the main office, the accounting department
should maintain a record of all deletion reports of all branches. These deletion reports
should also be printed and filed accordingly for future review purposes.

Management 1: Understood. Everyone, please take note of this.

5. 4th audit finding

Auditor 2: Now let us discuss about our audit on your company’s inventories. We
have found out that the branches of your company frequently experience stock outs of
certain inventory items. Your customers often get irritated with this situation because
certain food items in the menu are always unavailable.

Auditor 3: We believe that the reason behind this is that the company doesn’t have a
reorder point for its inventory items. Even though the inventory levels are already
low, they are still not being requested because restocking only depends on the
judgment of the branch’s chef. The company should establish correct procedures for
procurement of inventory items
Management 2: All of our hired chefs are extensively chosen. Each of them has
exemplary credentials and awards. That is why we placed great confidence in them.
We believe that since they are the experts in the kitchen, it is them who know when to
order the inventory items.

Management 3: And isn’t that a normal deficiency? That even happens with other
restaurants!

Auditor 4: Yes, but Sir/Mam, that should not be the case. Stock outs of inventory
items can lead to foregone sales. Orders from customers are always specific food
items. These orders cannot be taken because of missing ingredients.

Management 4: So what do you suggest then?

Auditor 1: Your Company should establish a concrete reorder point in the system
that will prompt the purchasing department to procure food items for each branch
with low inventory levels. The branches would no longer depend on the chef’s
judgment on when to reorder inventory items.

Management 1: Okay, that seems more rational rather than depending on our chefs’
judgments. We will take note of this.

6. 5th audit finding

Auditor 2: Well now let us proceed to our next audit finding. This is with regards to
your payroll. The payroll clerk of your company is acting as the paymaster also.
Probably you weren’t aware of the segregation of duties principle in the payroll
system. Maybe management just doesn’t understand how the payroll should be done.

Auditor 3: The function of the payroll clerk, which is to collect timekeeping

information and issue pay checks, should be separated from the function of the
paymaster, which is to distribute the pay checks to various employees.

Management 5: (The payroll clerk and paymaster) I have been a graduate of a

prestigious school and I believe that my integrity is not stained. I have been doing this
job for years now and I don’t see anything wrong with it.

Management 6: Yes, I agree. The payroll department has been doing perfectly fine
and there have been no issues of malicious intent reported.

Auditor 4: Probably there were none reported because they were properly concealed.
The payroll clerk may create ghost or non-existent employees and pocket the
fictitious pay which tantamount to theft.
Management 1: How can we slip this through our minds again? This is a major
concern! This needs to be addressed immediately! We can never be sure that there
hasn’t been a single incident of fraud or theft.

Management 2: I agree. “Management 5”, although we trust you, we just couldn’t

risk too much. We can never be sure of our environment and how it can greatly
influence us. (To auditors) So what can you recommend? What is a proper control for
this matter?

Auditor 1: What you can do is that you should follow the segregation of duties
principle in the payroll system by assigning another employee other than the payroll
clerk to do the functions of the paymaster to prevent the creation of non-existent
employees.

Management 5: Well, if that’s what right and proper, and it can enhance our
controls, then I’m up for it. Thank you for advice.

7. 6th audit finding

Auditor 2: We are now on our last audit finding. During our audit, we discovered
that branches have a high number of incorrect orders taken from customers. Wrong
customer orders always enter the kitchen without any verification procedures.

Auditor 3: Verification procedures in taking orders like asking again the orders from
customers, enumerating the orders taken, and showing the customers the list of orders
should be done by the employees.

Management 7: Reason out

Auditor 4: This issue arose because your company doesn’t provide employee
trainings for taking orders from customers. Procedures on how to take orders are also
not established by the company

Management 7: But we do give out trainings! The problem probably is that our
employees don’t take those trainings seriously.

Management 1: I agree. Also, we believe that a single training is enough. New

employees can always ask their managers/supervisors or older employees when they
encounter confusing situations.

Auditor 4: But that shouldn’t be! Because of lack of trainings, employees may take
wrong orders from customers, which will ultimately result to a loss. The kitchen will
definitely prepare the wrong order taken from the customer and it won’t be accepted
after it leaves the kitchen. This means that these orders will just be a waste!
Management 6: Okay, okay. This seems like an issue too. How can we be so
tactless? But anyway, is there anything we can do to improve this situation?

Auditor 1: The company management should establish procedures and protocols in

taking orders from customers. These should be communicated to various employees
through constant employee trainings and meetings.

Management 1: We will take note of this too, and all of your recommendations from
all of the audit findings.

8. Conclusion/Closing remarks