Advanced Auditing:

The Trent Valley Ski Resort (TVSR) is located in Central Ontario, away from most other attractions and villages. It is a 60-minute drive from Peterborough, the nearest major city. It was run by Cathy and Peter Forint since their family developed the resort in the 1980s. However, since 2008, they had left the day-to-day running of the business to their Operations Manager, Suzanne Mariot. In early 2016, Cathy and Peter decided they wanted to retire to Florida and live an easy life. They sold TVSR to Fred and Gloria Martinez, who are both currently working as licenced dentists in Toronto. Not being trained in business specifically, and because they immediately liked Suzanne, Fred and Gloria leave almost everything to Suzanne when it comes to running the business and anything financial. Fred and Gloria, being quite busy with their dental patients, rarely get to TVSR and are kept informed about the resort via telephone conversations and emails. Suzanne runs TVSR as the head person, but she also hires some other staff between the October to March Ski Season each year, such as Ski Lift operators (who help skiers get on and off the chair lifts). TVSR also has a popular bar serving alcoholic and non-alcoholic drinks and some snacks too. Suzanne hires season Bartenders to work in the bar serving drinks and basic food options. Suzanne schedules all the staff and, as such, she pretty much knows who worked and when each week. As a result, Suzanne finds it efficient to pay all staff based on the scheduled hours each week. This avoids the time consuming task of requesting time sheets and reviewing them. In addition, Suzanne pays herself by cheque (signed by herself) to avoid being late with the payment. Suzanne will order in alcohol supplies and food supplies from Jimmy Chiu, a local resident with a large truck. Jimmy will often bring the alcohol and food Suzanne ordered and leave it outside the back door of the bar because nobody is at work when Jimmy delivers (usually 11pm at night, Jimmy being busy in the daytime). The next morning, the Bartenders often simply add the deliveries to the physical supplies of alcohol and food without checking the quantities because they are very busy with customers. TVSR issues day tickets that skiers wear on their ski jackets, attached to the jacket zipper by a metal loop. To cut costs, the tickets all look the same. Each day ticket is the same design and colour throughout the season of October to March. Each season ticket remains the same design colour year after year. Suzanne says she pretty much knows the customer base, even though her responsibilities do not allow her to actively monitor this. Recently, Suzanne has heard some people are leaving these tickets attached to their jackets and retuning for another day or even another full season of skiing but without paying! Because Suzanne is so busy, she never issues receipts for payment from customers upon buying a day ticket or season ticket, so she thinks she cant do anything about the situation. Besides, she thinks the number of people who do that kind of thing is small. After every March (when the skiing season is over), Suzanne will prepare the full year financial statements for Fred and Gloria. Suzanne is too busy to do this monthly, but Fred and Gloria have never complained. In fact, Fred and Gloria only ever ask basic questions in the late summer or early autumn, if they have any questions at all. Suzanne travels throughout the off season, and ensures that she leaves TVSR locked and secure.

Every September, Suzanne prepares to open up TVSR for the upcoming ski season. One of the things she does is reconcile the bank statements received from the past months (April to August) when the resort has been closed. Even though there are few transaction during this time, usually there is a cheque or two that has been returned for insufficient funds in TVSRs account. Early October, Fred and Gloria make their only visit to TVSR. Because of their irregular visits, Suzanne asks Fred and Gloria to sign several blank cheques (signed cheques but with the payee and dollar amount not completed) in case there is an urgent need to pay someone. Fred and Gloria says they prefer that to driving Ontarios roads in snow-and-ice conditions! Suzanne retains these blank cheques in her desk drawer. Because she has a tendency to lose keys, she decided it is safer to simply keep the desk drawer closed (but un-locked) all the time rather than be unable to access the cheques when needed. Fred and Gloria are very happy with the financial performance of TVSR and Suzannes performance as Operations Manager. However, Fred and Glorias neighbour in Toronto, Ali Reeza CPA, had communicated some concerns when he heard about TVSRs operations and practices. Ali recommended that you should conduct a review of TVSRs Internal Controls. Required: Identify five Internal Control weaknesses at TVSR and provide an answer addressing each weakness as follows: a) State the Internal Control Weakness b) What is the resulting Risk from each of the Internal Control Weaknesses c) What is your recommendation for change