Reference no: EM132796065

John David runs Elegant Spa, a business providing women-only hairdressing, beauty, relaxation massage, and counselling services in a small tourist town. 90% of the clients using the beauty and massage services at Elegant Spa are weekend visitors to the town, but 80% of the hairdressing and counselling clients are locals. The masseuse and counsellor have formal qualifications and are registered with the medical authorities, allowing clients to claim the cost of the service with their private health insurer if an appropriate receipt is provided when the client pays.

• Elegant Spa has just opened another branch of the business in a town 100 kilometres away, and there are plans for a third branch to be opened next year. John has been very busy establishing each new branch and relies on staff in each office to run the day-to-day operations, including ordering supplies and banking receipts. In addition, the branch manager organizes the staff and authorizes their time sheets. John makes the payments for rent, power, salaries, and large items of expenditure, such as furniture purchases.

Required:

Problem a) Give examples of transactions that would occur at Elegant Spa

Problem b) Explain, based on risk assessment component, what could go wrong with these transactions if the system of internal control could not meet any of the internal control's objectives.