Sleep-well Hotels Company operates a chain of 18 hotels located across the country. Each hotel has bedrooms, a restaurant and leisure club facilities. Most visitors to the restaurant and leisure club are hotel guests; however, these facilities are open to the public as well. Hotel guests generally charge any costs to their room but other visitors must make payment directly to the hotel staff.

During the year, senior management noticed an increased level of cash discrepancies and inventory discrepancies, and they suspect that some employees have been stealing cash and goods from the hotels. They are keen to prevent this from reoccurring and are considering establishing an internal audit department to undertake a fraud investigation.

Required:

(a) Explain how the new internal audit department of Sleep-well Hotels Co could assist the directors in preventing and detecting fraud and error. Support your answer with 3 points.

(b) Describe two (2) limitations of Sleep-well Hotels Co establishing and maintaining an internal audit department.

(c) The directors would like the internal audit department to have as broad a role as possible, as this will make the decision to recruit an internal audit department more cost effective. Describe five (5) additional functions, other than fraud investigations, the directors of Sleep-well Hotels Co could ask the internal audit department to undertake.