Question 3

You are the audit senior on the audit of Bar Hound Ltd - a licenced venue which also has dining facilities and accommodation catering for around 100 guests. Your initial review of the business has highlighted the following significant risks.

1. Payroll expense. Bar Hound employs, in additional to its full-time staff, a significant number of casual, cleaning, waiting, bar and administrative staff. Overtime is often worked on weekends and night shifts due to a shortage of staff. However, payment at overtime rates for standard weekend and night shifts has been a common occurrence. 2. Accounts payable. Bar Hound has large number of suppliers for various supplies, including liquor, food and hotel supplies. Paying the supplier twice for the same purchase has been a common problem.

Required:

For each of the accounts identified (1 and 2 above):

a) Determine the key assertion at risk. Justify why this assertion is the most important. (2 marks) b) Describe a practical internal control that would prevent the risk. Justify your choice of control. (4 marks) c) Describe a practical internal control that would detect the risk. Justify your choice of control. (4 marks)

Please present your answer in the form of a table as follows:

Account at risk	Key assertions at risk and justification	Preventative internal control and justification	Detective internal control and justification
A. Payroll expense: overpayment of overtime
B. Accounts payable: payments made twice to the same supplier