Eco 429 Management Finance

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       INTERAL AUDIT – EXECUTIVE MEMO          _

October 20, 2015

To:         CEO & CFO of Loyola Limited

Cc:         President of Felice’s

Cc:         Professor Ramenofsky

From:         Control Cops (Krystal Lofton, Jenna Matthias, Xiaoyun Xia, Xinxin Xu, Nasanjarjal Zana)

Re: Other Risks         Testing Summary

Background:

Our team was engaged to perform a review of the Other Internal Control Cycle for Felice’s Kitchen. Upon acceptance of the engagement, we researched the restaurant industry and Felice’s specific business activities in order to better understand the business. Individually, we went to the restaurant and documented our observations of their business processes in order to identify key areas of risks and controls primarily relating to the security features in place at the restaurant and various regulation standards required by the City of Chicago, for example, signs indicating smoking is not permitted inside the restaurant. We interviewed management regarding our risks we identified and were able to gain a better understanding of the controls they have in place. After talking with management, we developed a set of procedures to test the controls in place and were able to perform the tests with management’s approval. After conducting our tests we spoke with management and gave them an opportunity to respond to our findings.

The purpose of this report is to document our fieldwork testing and provide a brief account of our findings. Throughout the planning stage we identified three areas of risk that we believed posed the highest risk to the restaurant. In order from highest to lowest in terms of risk they are, the overall security measures that are in place at the restaurant (i.e. working cameras in place and a working panic button), fire safety concerns, and required signage within the facility (i.e. maximum occupancy limits and no smoking signs). Throughout the course of testing we found that not all cameras were in working order and that management was unaware of how to check the camera footage. It was also noted that not all fire extinguishers were up-to-date on current inspection requirements and they were without required signs stating the maximum occupancy limits and no smoking inside the restaurant. While these findings pose a low-risk to the business overall, their non-compliance with regulations could result in fines and/or closure if not corrected immediately. Throughout the rest of the report you will find a detailed analysis of our fieldwork testing stating the results/findings of each test performed and our recommendations for management.