ACCT58-ch.4-exercise - Exercise4.47 MajesticHotel

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Exercise 4.47 Majestic Hotel Preliminary Analytical Procedures FYE 3/31/2011  Based on information received from Majestic’s Hotel Controller A.J. Marcello and comparing  this information with industry average statistics obtained from the Nation Hotel Industry  Guide, here are the list of areas that could represent potential misstatement in the audit: 1. Costs: Cost of Food and beverage is 34%- too high in comparison to industry’s 27.2%  possible fraud from employee’s or management’s side. Management fee – 3.3% too high in comparison to industry’s 1.1% Profit per sales dollar is very low 17.4% in comparison to industry’s 25.4%.  2. Rooms dept. ratios to room sales dollars: Salaries and wages 18.9% is too high but laundry expenses are low  3. F/B ratios to FB sales dollars: Cost of food sold is too high when Food Gross Profit is too low, possible fraud  from employee’s side.  The same picture with Cost of beverages sold and Beverages Gross Profit high expenses with very low profit- possible fraud. Combined gross profit is only 57.7% -low in comparison to industry’s 64.6%, but 
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This note was uploaded on 06/03/2010 for the course ACC 64 taught by Professor Kwak during the Spring '10 term at DeAnza College.

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ACCT58-ch.4-exercise - Exercise4.47 MajesticHotel

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