The internal control procedures of the purchasing cycle of a Maltese hotel group : a case study

Abstract

Purpose The purpose of this case-study is to evaluate the purchasing cycle within a local hotel group and the related control procedures. This case-study assesses the general control environment prevailing in the two hotels, insofar as this is of specific relevance to the purchasing cycle's controls and ensures that every purchase is properly authorised. Thus, it evaluates the existing controls in the various stages of the purchasing cycle and other elements with regard to stock control. Design The objectives of this case-study were achieved by conducting unstructured and in-depth interviews with the hotel group's personnel. Interviews were conducted with the Financial Controller, the Purchasing Officer, the Food and Beverage Manager, and the Store-keeper of the hotel group. The management was also interviewed to obtain a complete picture. Findings The study shows that both hotels implement the necessary control procedures in every stage of the purchasing cycle. The personnel duties are segregated and thus the potential for committing errors is kept under constant control. Every transaction incurred is properly authorised by persons having the adequate level of authority within the hotel group. Moreover, the necessary controls are implemented to ensure maximum control with regard to stock movements within both hotels. ii Conclusions The hotel group's purchasing cycle system is implemented in such a way that every purchase is approved by authorised persons. As a result, only authorised purchases are incurred. Every purchase is appropriately recorded in the accounting records and record keeping of every document is held. Value The implementation of controls within the purchasing cycle is of great importance since the purchasing operation is one of the main factor