What can go wrong at the transaction level Carmel Harrison owns and runs Emerald Spa, a business…

What can go wrong at the transaction level

Carmel Harrison owns and runs Emerald Spa, a business providing women-only hairdressing, beauty, relaxation massage, and counseling services in a small tourist town. Ninety percent of the clients using the beauty and massage services at Emerald Spa are weekend visitors, but 80% of the hairdressing and counseling clients are locals. The masseuse and counselor have appropriate qualifications and licenses, allowing clients to claim the cost of the service(s) with their private health insurer, if an appropriate receipt is provided when the client pays. Emerald Spa has just opened another branch of the business in a town 100 miles away, and there are plans to open a third branch nearby next year. Carmel 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 depositing cash receipts. In addition, the branch manager organizes the staff and authorizes their time sheets. Carmel makes the payments for rent, power, salaries, and large expenditures, such as furniture purchases.


a. Give examples of transactions that would occur at Emerald Spa.

b. Explain what could go wrong with these transactions if the system of internal control is not effective for each transaction class assertion.

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