Restaurant Visit Internal Control

Audit Work Program

Project Team (list members):

Project Timing:

Date

Comments

Planning
Fieldwork
Report Issuance (Local)
Report Issuance (Worldwide)

Audit Objectives
Time

Project Work Step

I. PRE-AUDIT
A. Set-up a disk sub-directory for the audit. Title the sub-directory by
market name. Include all computer files pertaining to the audit under
the sub-directory.

Initial

Index

B. Contact the appropriate Marketing VP(s) and explain the scope and
timing of the audit.
C. Prior to your audit trip contact the Controller, Supervisors,
Corporate Cash Manager, Payroll Manager and anyone else whom
may know of questions or problems regarding the market.
D. Determine key exposure areas (i.e., operational scores, change in
operating income, labor productivity, other controllables, cash
variance, actual vs. theoretical food costs, etc.) for the market. Assess
and weigh (%) the effect of these exposure areas for each restaurant.
Rank the restaurants from worst to best. Based upon the scope, audit
the appropriate number of restaurants as per the risk assessment.
E. Information to and from the Regional Accountant the week prior to
the field visit:
1. Ensure the Regional Accountant will be available for assistance
(vacation, seminar, etc.)
2. Obtain a listing of recent Restaurant Managers for introduction
letters.
3. Obtain a complete listing of restaurants and verify that all
restaurants are scheduled to be open.
4. Request a listing of the various depository bank charges/fees that
the local banks charge (company) (e.g., per deposit, change, monthly
charges, etc.). This listing will be used during bank reconciliation
review to determine excessive bank charges and inefficient banking
by Restaurant Management. (This listing may only be obtained for
non-(insert state) banks).
5. Determine the Regions system for filing I-9s. (i.e., by Restaurant,
District or Market.)
6. Provide via fax, the Internal Audit Checklist and the Restaurant
Performance Report Variance Analysis Explanation Request letters to
the Regional Accountant(s), so that they may organize the documents
requested and prepare explanations prior to our arrival to the Market.
7. Request the most current periods X Daily Cash Report and review
for any unusual journal entries.
F. General Information in Office.
1. Review all policy and procedure changes, as well as specific laws
(e.g., minors, overtime, tip credits, etc.) related to the state you are
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auditing to ensure that all audit steps are accurate and up-to-date.

Initial

Index

2. Review the (company) Restaurant Performance Report, prepared

by Financial Reporting for material percentage-of-sale variances
above or below the Markets averages for total food costs, labor costs
and other controllables. Note restaurants in the same market with
approximately the same sales, but with material differences in
expenses. Also note that all restaurants with high cash variances for
further review.
All variances should be noted in a letter and forwarded to the
respective Regional Accountant and Market Manager (copies to the
Marketing VP) requesting an explanation for each variance noted in
their District(s).
3. Review the Markets prior audit report and note any problem areas
or restaurants for follow-up review during the current audit. Note
repetitive problem areas in the current audit report. In addition, note
any restaurants from the prior years audits that were not visited and
make sure they are audited in this audit.
4. Obtain a copy of the Trial Balance by Restaurant, Regional Office,
Maintenance Department, Regional Accounting and any other market
related cost center. The Trial Balance may be obtained from the
Accounting Department.
G. Reports downloaded from the system.
Download the following reports for the District(s) audited for the most
current period and format:
1. Current Employee List
2. General Ledger balances for:
a. xxx - petty cash
b. xxx - change fund
c. xxx - (company) Deposits in Transit
d. xxx - credit cards
e. xxx - A/R other
f. xxx - A/R promo
g. xxx - A/R gift certificates
Review all the accounts for reasonableness and compare like Balance
Sheet accounts of restaurants under review. Note any unusual items
and follow-up with the Marketing VP.
3. Download a listing of all year-to-date journal entries posted by the
respective Regional Accountant(s).
H. Reports from other departments necessary one week prior to the
field visit.
1. Prepare the Introduction Letters and have them signed by (name)
(use first names of Restaurant Managers).
2. Prepare the following employee lists from the current employee list
download:
a. I-9 list detailing District, Restaurant, Name, Social Security Number,
Date of Birth, Hire Date, Job Code and Status Code, sorted by filing
method determined (by restaurant, district or market).
b. Active minors list, noting all employees whom are under the age of
18, detailing District, Restaurant, Name, Social Security Number,
Birth Date, Hire Date and Job Code sorted by district and by
restaurant.

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3. Obtain an Unapproved Vendor Report detailed by market and
General Ledger Expense Account from (name) (SMS) noting which
vendors are being used to provide food products. The report contains
the last two full periods plus all activity for the current period. Before
commencing the audit, review the report with the Purchasing
Department to verify that all vendors are approved by (company)
(note all unauthorized vendors in the report).
4. Obtain the current labor productivity report from Financial Planning
and note any significant variances from the guideline for further
review.

Initial

Index

5. Determine the Senior Discount Policy from the Market Manager.

I. Send out the Pre-Audit Survey to the Market Manager.
II. REGIONAL OFFICE INTERNAL CONTROL REVIEW
A. Cash and Sales Report Review
1. Cash and Sales Analysis
Objective: To determine any material trends in certain Cash and Sales
transactions.
a. Obtain the last five Sundays Cash and Sales Reports.
b. Prepare analysis of :
1. Number of customers per void count and void dollar per number of
customers.
2. Actual cash variance per tender transactions (net of any accounts
receivable)
3. Paid out count and amount (net of any labor paid outs and alcohol
purchases)
c. Review the schedules prepared in step II.A.1. above and note any
trends, material fluctuations from the norm, or any other unusual
variations that should be reviewed during the detail compliance
testing.
2. Detailed Compliance Testing
Objective: To ensure that all transactions are authorized, complete,
accurate and substantiated.
Scope: Audit all transactions in the market for the two most current
weeks with special attention to any issues noted in the Cash and
Sales Analysis. Expand scope as deemed necessary.
Note: When reviewing Cash and Sales items be sure to note the
Cashier/Managers name, if possible.
a. Agree all weekly opening and closing activity readings, also
noting that the daily activity and daily gross sales line item
numbers agree. If the daily activity and daily gross sales line item
numbers do not agree, perform the calculation to ensure that all sales
transactions are properly recorded. If sales transactions are missing,
request the Electronic Journals for days any transactions are missing.
When daily amounts on the Cash and Sales Reports are not totaling
correctly on a consistent basis, note the restaurant number for a visit.
At the restaurant, review the Electronic Journal for the daily function 9,
which signifies that the Restaurant Manager took an opening reading
and zeroed out all totals before any customer transactions were
recorded.
b. Paid Outs
1. Pay particular attention to those restaurants noted in the Cash and
Sales Analysis as having excessive amounts.
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2. Agree all paid outs to a receipt, signed and approved by Restaurant
Management.
3. Agree the total dollar amount on the Paid Out Log to the total dollar
amount on the respective Sundays Cash and Sales Report.
4. For restaurants with excess amounts, list the items that are being
purchased (i.e., cost of sales items, office supplies).
5. Verify cash paid outs between $X and $X (excluding alcohol and
labor paid outs) are approved by the Market Manager.
6. Verify cash paid outs between $X and $X are approved by the
Marketing VP.
c. Review the credit card summary tape for possible duplicated
transactions without credits or adjustments. Also review for manual
and non-manual credit card transactions for the same credit card
numbers.

Initial

Index

Follow-up on all Cash and Sales Reports with credit card deposit
overages and cash shortages, not reconciled with an explanation.
This is a sign of potential credit card fraud that requires an increased
audit scope. Review the credit card invoices or the summary listing
that support the Cash and Sales Report, noting all hand-keyed (M)
credit card transactions. All hand-keyed credit card transactions must
be accompanied with an imprinted credit card hard copy.
d. Verify that material cash shortages and overages of $X or more are
documented with an incident report. All incident reports should be
completed in their entirety and dated within X hours of the incident
(use actual over/short).
e. Trace the validated deposit slips or respective bank statement to
the corresponding deposits on the Cash and Sales Report, noting the
correct deposit amount and the timing of the deposit. All deposits
should be credited by the bank the second business day immediately
following the sales date. For all exceptions, note the corresponding
restaurant, sales date, deposit date and amount.
f. Review deposit slips for any personal or payroll checks being
deposited (outside of (insert state), only). If payroll checks are noted
using the query from Payroll, follow-up on the existence of those
employees (validations may also be printed on the reverse side of the
deposit slip as well).
g. Review the bank statement for the corresponding period to
determine if:
1. deposits are being credited and debited within a day of each other
for restaurants that use the wire transfer company (e.g., FDR)
2. verify that the confirmation/control numbers from the wire transfer
company are recorded on the Cash and Sales Report.
h. Agree the void receipts attached to the Cash and Sales Reports,
with the amounts and count reported on the Cash and Sales Reports.
Pay particular attention to those restaurants noted in the Cash and
Sales Analysis as having excessive voids. Ensure that all voids are
processed in accordance with Company policy (i.e., processed not
more than X hours or during the same meal period after the
occurrence, signed with explanation, etc.)
If void discrepancies are consistently being noted, follow-up to see if
the discrepancies relate to the same cashier. Track the cashier
number which is noted on the bottom of the sales receipt and the
number of voids per cashier.
Any restaurant noted as having questionable or an excessive amount
of voids should have voids audited at the restaurant through the use
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of the NCR Electronic Journal. Review the latest Cash and Sales
Reports on the Friday prior to visiting the restaurants.

Initial

Index

Note the transaction numbers (on the sale, void and re-ring receipts)
and the reason provided on the back of the void, for five voided
transactions. This will allow you to determine the validity of each void
at the restaurant by comparing the reason described on the back of
each void to the detailed void and re-ring transaction in the Electronic
Journal.
i. Verify that the Cash and Sales Report is signed and dated by the
Restaurant Manager.
j. Note any material or consistent cashier cash variance, based on the
Cash and Sales Compliance testing performed at the Regional Office,
so proper follow-up (i.e., written warnings) can be performed during
the restaurant visit.
B. I-9s
Objective: To ensure that I-9 forms are processed and maintained in
compliance with Federal Law and Company Policy.
1. Review of compliance with Immigration Reform Act of 1986 I-9
forms.
a. Ensure that all employees listed on the Current Employee List have
I-9s. If Regional Management states that certain employees have
been terminated, ask them to produce the termination EDF.
b. During your review of I-9s, look for the following as a possible
indication of a fraudulent card:
Scope: Review the X most recent employees and the X employees
hired just after (insert date) for every restaurant as listed on the
current employee roster. In addition, obtain the number of employees
who are required to have I-9s, by restaurant, to extrapolate potential
audit risk.
Social security/alien registration cards appear to be typewritten,
name does not coincide with the name stated on the I-9 (e.g.,
spelling).
The entry date into the US on the Resident Alien Card is
subsequent to (insert date).

Temporary alien or work authorization card does not have

consistent typeset and/or has an expiration greater than two
years.
Social security numbers that begin with a 9.

c. Verify that a system to track any expiring document (i.e., work

authorization card, temporary alien registration card) is in place.
C. Minors
Objective: To ensure all minors are working within Federal and State
regulations.
Scope: Review of all minors (under 18) as listed on the current
employee roster.
1. Review Local, State and Federal Laws on the employment of
minors. Identify the following by using the Employee List:
a. Employees under the age of 18 for further investigation of
compliance with State Labor Laws and maintenance of work permits
during the restaurant visits.
Note: According to (insert year) information from the Department of
Labor (DOL), the agency assesses these penalties for the following
infractions.
1. $X-$X(depending on the teens age) for each worker under 18 who
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performs certain hazardous duties, such as operating a food slicer.
2. $X minimum for each illegally employed minor who suffers a
serious injury resulting in lost work time.
3. $X-$X for each illegally employed minor who suffers a permanent
disability.
4. $X for an illegally employed minor who suffers fatal injury.

Initial

Index

Note: In accordance with Federal regulations, minors are prohibited to

operate, feed, set up, adjust, repair, oil or clean power driven slicers
and mixers.
For each violation of the child labor provisions, employers may be
subject to a civil money penalty up to $X.
2. Is Regional Accountings system for tracking expired work permits
adequate?
D. Payroll
Objective: To ensure all payroll transactions are authorized, complete,
accurate and substantiated.
Scope: Review 1) all employees who worked overtime and/or who
have different pay rates (i.e., food server, cook, dishwasher) and 2) a
sample of food servers where the tip credit allowance is used. By
using the X, different employee pay rates can be verified with the
Payroll Register. On a judgment basis, review the remaining
timecards. In addition, pay particular attention to those restaurants
noted with labor productivity variances from the guideline.
1. Obtain the most recent Payroll Register, X and timecards or
Employee Sign Off Report, and review for the following:
a. Trace hours worked per timecard to hours worked per Payroll
Register and recalculate when deemed necessary.
b. Review all overtime timecards to ensure that overtime is in
compliance with local, state and federal policies.
c. Where the TIP credit is used, ensure that the employees are
reporting enough tips to reach the respective minimum wage and that
FICA is being paid on the minimum wage amount.
Request from Payroll, the Minimum Wage Report for the respective
audited payroll period(s). This report reveals all tip credit employees
who did not report enough tips to reach the federal minimum wage.
For these employees, (company) was required to pay additional
wages.
d. Review timecards for the employees and managers signatures. If
the Employee Sign Off Report is used in place of timecards, verify that
both the employees and managers have signed the report.
e. Compare employees on the Current Employee List to the
employees on the Payroll Register:
Follow-up on all differences
Identify termed employees who may still be listed as active and
for whom insurance benefits are still being paid
f. Timecard adjustments should be made through the time clock,
however, if manual/handwritten adjustments exist on the timecards,
the adjustments should be signed off by the restaurant manager and
employee (recalculate manual additions of employee hours).
g. Ensure that the employee who worked X or more hours clocks out
for a minimum of X minutes (break) in accordance with state law, if
applicable.
h. Employee hours worked at different (company) locations should be
accumulated and submitted by their assigned home restaurants.

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i. Observe employees on the X and Payroll Registers who have not
worked in the last pay period and follow-up with the Regional
Accountant for explanations.
j. Review timecards for employees clocking in or out X to X minutes
early or late to receive a quarter of an hour extra pay.
2. Overtime
a. (insert state) overtime

Initial

Index

After X hours worked in one day

After X hours worked in one work week

For the first X hours worked on the 7th day worked in one work
week
Exception: No overtime pay is required for an employee who works 7
days in one work week, does not exceed a total of X hours in the
week and does not exceed X hours in any one work day.
b. (insert state) double-time
After X hours worked in one workday

After X hours worked on the 7th day worked in a work day

3. Review account X analysis for extremely high amounts and

extremely low labor costs as a percentage of sales.
4. How do the Regional Accountants handle unclaimed payroll
checks? Research for proper procedure.
E. Inventory
Objective: 1) to verify inventory G/L account balances, 2) to ensure
inventory count sheets and reports are complete, accurate and timely,
and 3) to ensure valuations are accurate.
Scope: Review period end weeks Ending Inventory for all restaurants.
Pay particular attention to those restaurants noted with excessive
inventory and high food costs as a percentage of sales.
Note: High food costs or inventory shortages can be a warning sign
that orders are not being rung-up on the registers.
1. Review the Ending Inventory Count Sheet for unusual items and
reasonableness (closely review crossed out or manual changes on
the Inventory Count Sheet).
2. Verify that the same unit costs of the same inventory items apply to
the other restaurants in the same market.
3. Agree the Weekly Inventory Count sheet generated by the
restaurants to the Inventory Journal Print generated by the Regional
Accountant.
4. Trace unit costs for X high unit costs items to vendor invoices.
5. For all restaurants tie the most recent period end Inventory
Journals to the corresponding G/L trial balance for three G/L
accounts: X (meat), X (seafood), X (grocery).
6. If there are any unusual manual additions to the Ending Inventory
Count Sheet, verify that these inventory items are approved.
F. Bank Reconciliation
Objectives: 1) to verify cash and credit card G/L account balances, 2)
to determine the completeness of cash receipts, and 3) to determine
the accuracy of processing and summarization of cash.
Scope: Review all restaurant depository bank (X) reconciliations and
credit card (X) reconciliations for the most current period.
1. Tie out the bank reconciliations to the G/L and bank statements.
2. Clerically test X% of the bank reconciliations.
3. Trace Deposits in Transit to a subsequent bank statement or
validated deposit slip.
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4. Ensure that bank reconciliations are completed on a timely basis
(i.e., by the subsequent period end) and that reconciling items are not
more than X periods old).
5. Follow up on any unusual or excessive reconciling items.
6. Follow up on all reconciling items.
7. Are bank analysis charges in line for all restaurants within the
market? Review unusually large amounts of bank service charges.
8. Are restaurants only making one deposit per day? (i.e., completing
more than one deposit slip and only going to the bank once per day).
Incremental charges are incurred for each deposit.
9. Review for unreasonably large, excessive (greater than one day of
sales) residual balances in the depository accounts. Excess cash
noted on the bank reconciliations (more than X days of deposits)
could be a sign that the managers are not calling FDR on a daily
basis. Therefore, cash is not being transferred timely.
10. Review the bank statements to ensure:
a. At least one deposit is credited each business day. Those
restaurants which have Armored Car pick-up will not have their
deposits picked up on Sundays and holidays. Therefore, the deposits
occurring on these specified days will not be credited the next
business day.
b. Every deposit is debited or transferred by the wire transfer
company on the next business day (for non-(insert state) banks), and
the amount credited equals the amount debited.
11. Review for proper work paper techniques (i.e., dated, signed and
readable).
G. Departmental Expenditure Review
Objective: To determine 1) the accuracy and summarization of
purchases, 2) completeness of cash disbursements, and 3) if liabilities
are reported on a timely basis.
Scope: All restaurants, Regional Office, Maintenance Department and
other Market related cost centers.
1. From the Departmental Expenditure Report, prepare a listing of all
unusual accounts payable disbursements (e.g., employee names,
invoices charged to the wrong account, invoices per restaurant above
the regions norm). Have the invoices pulled and review for propriety.
2. Review vendor invoices per restaurant from the most current X
report including Maintenance cost center, if applicable.
a. Determine if the invoices are properly approved.

Initial

Index

b. Determine if the invoice amount, number and items agree to the

report X.
c. Determine if discounts were taken.
d. Foot the prices and the invoice to determine if correct amounts
were charged.
e. Check for propriety and legitimacy.
f. Determine if the vendors are paid on a timely basis.
3. Review X distributor invoice per restaurant to ensure that
(company) is not paying sales tax on times which are being resold to
customers. Items for (company)s end use (i.e., janitorial and paper
goods) are taxable.
4. Discuss unusual items with the Marketing VP and Market Manager.
H. Approved Vendors Review
Objective: To ensure that the restaurants only order products from
authorized vendors.
Scope: All restaurants
1. Review the food product purveyors on the Unauthorized Vendor
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Report. Confirm that all vendors are authorized. Follow-up on all
unapproved vendors with the Corporate Purchasing Department.
2. List all unauthorized vendors being used and prepare a matrix
detailing products and unit cost. Determine how the unauthorized
vendor was set-up and is being paid.
3. Confirm internal controls, for vendor approval (vendor set-up)
policy, are in place and operating effectively.
I. Cash (if there is a checking account or petty cash exists)

Initial

Index

Objective: To verify and agree cash balances to G/L account X.

1. Review disbursements for any unusual items, including payments
to active employees, software purchases and any regular and
frequent vendors that are paid out of petty cash. Follow-up on any
exceptions.
2. Perform a cash audit on the Petty Cash Account using the Cash
Count Worksheet.
3. Look for any unusual deposits or contributions (e.g., rebates from
vendors).
4. Are all petty cash disbursements evidenced by supporting
documents and do they have proper approval?
5. Ensure petty cash is reimbursed according to Corporate policy and
procedures.
6. Perform a have/need analysis of all cash accounts.
7. Verify that proper segregation of duties exists between the
disbursements of cash and the maintenance of cash disbursement
records.
J. Paperflow
Objective: To identify opportunities to streamline paper flows.
Scope: All restaurants, Regional Office, Maintenance Department and
other market related cost centers.
1. Evaluate the flow and coordination of all filed and published
information.
2. Review the reproduction and duplication of data (i.e., financials and
other reports).
3. Evaluate the paper retention policy.
4. Evaluate the methods of obtaining data from the field and regional
level for purposes such as marketing, forecasting, etc.
5. Identify unnecessary/not used paperflow throughout the Market,
noting the reason paperflow is not used/unnecessary.
K. Payroll Verification Logs
Objective: To ensure payroll verifications are being performed in
compliance with Company policy.
Scope: X payroll verification log from each restaurant.
1. Confirm that annual restaurant payroll verifications take place in
accordance with written policy and review at least one payroll
verification log per restaurant.
2. Market Managers are responsible for conducting payroll
verifications at least once per year at each restaurant to eliminate the
exposure of ghost employees. The procedures are as follows:
a. Does each Market Manager Clerically test and agree the employee
paychecks to the Payroll Register?
b. Does each employee present a valid picture ID to the Market
Manager and sign the Verification Log before the Market Manager
releases the payroll check?
c. Does each Market Manager properly follow-up on any unclaimed
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payroll checks or missing signatures to ensure that the employee
actually exists?
d. Determine, through a discussion with the Market Manager(s), what
procedures are utilized and what controls exist while performing
payroll verifications (e.g., are Market Managers monitoring whether
any employees are terminated from the time the Market Manager
disclosed a verification would take place).
L. Accounts Receivable
Objective: To substantiate and evaluate all receivables

Initial

Scope: All restaurants with receivables (i.e., G/L accounts X and X)

1. Obtain an account analysis or aging for all accounts receivable.
a. Assess the collectibility of these accounts. What is the billing and
collecting procedures?
b. Are balances aged?
c. Review for unusual items.
d. Tie out to the G/L.
e. Review the supporting documentation.
f. Clerically test.
M. Gift Certificates
Objective: To verify and agree gift certificate balances to G/L account
X.
Scope: All restaurants.
Review the Gift Certificate (GC) procedures and tracking and perform
the following steps:
1. Beginning with the GC account analysis, perform a roll
forward/back to determine the GC balance for each restaurant (100%
scope). Note all differences between physical GC counts performed
during the restaurant visits and Regional Accountings analysis.
Those restaurants not visited should be telephoned for a physical GC
balance.
2. Ensure that adequate procedures and efficiencies are implemented
in the accounting and handling of gift certificates.
3. Confirm that a system of internal controls over the physical security
and accounting of gift certificates is in place and operating effectively.
4. What procedures are followed to ensure gift certificates are
properly voided after they are redeemed.
N. Review the Market Managers Quarterly Cash Inspection Reports
for the most recent quarter and note whether the District Manager has
followed up on restaurant deficiencies. Ensure that the correct
inspection form is being used. Also note any unsatisfactory audit
issues and the inspection form that reoccur as an issue in the current
audit.
O. Determine if any equipment has been sold. If so, how was the cash
handled? How was it recorded in the General Ledger?
P. The following list of items must not be substitutes:
Description
1. (insert item)

Vendor
(insert vendor)

The above items are felt to be of such significance to the overall

(company) concept that their specifications must be adhered to by
both Company operated and franchised restaurants.
UPON COMPLETION OF THE PREVIOUSLY NOTED AUDIT
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STEPS, COMPILE A DRAFT REPORT TO DETERMINE THE
RESTAURANTS WITH POSSIBLE EXPOSURE AREAS FOR
RESTAURANT AUDITS. A SCOPE OF AT LEAST X%-X% OF THE
RESTAURANTS SHOULD BE VISITED. IF ANY SPECIFIC
RESTAURANTS IN THE MARKET APPEAR TO HAVE A SEVERE
LACK OF CONTROLS NOTED DURING YOUR REVIEW AT THE
REGIONAL OFFICE, YOU SHOULD INCREASE YOUR SCOPE TO
ALLOW A MORE ACCURATE COVERAGE.
III. RESTAURANT VISIT

Initial

The restaurant visit checklist should be used to assist in the review of

the following items:
A. Cash Verification and Procedures
Objective: 1) Verify and agree the change fund to the G/L account X,
2) Verify all cash receipts and gift certificates, and 3) Ensure cash is
adequately safeguarded and accounted for.
1. If restaurant is visited prior to opening:
a. Count all cash and cash like items in the restaurant:
Change fund
Cash drawers
Petty cash (if applicable)
Prior days deposits
Gift certificates
b. Have the Restaurant Manager sign the cash count sheet.
c. Reconcile the change fund balance to the G/L.
d. Reconcile the value of gift certificates, located at the restaurant, to
the G/L account.
e. Report all IOUs.
f. Follow-up at the restaurants observed to have frequent cash
variances and possible exposures during the review at the Regional
Office, with detailed questions about their cash handling policies and
procedures (written warnings and over/short log). Review the
Over/<Short> Log for the current week and last week and note any
cashier(s) who has excessive variances.
g. Reconcile the prior days deposit to the prior days Cash and Sales
Reports.
h. If the restaurant accepts personal checks, make sure each check is
accompanied with the customers DL or ID number. If there are no
numbers on the check, a managers signature must be noted on the
check.
I. Follow-up at the restaurants observed to have frequent voids during
the review at the Regional Office. If the restaurant retains the detail
Cash and Sales Report, note any cashier(s) who has excessive voids.
2. If restaurant is visited while open:
a. Have the Restaurant Manager process all voids and run a register
report that will detail the sales for each drawer.
b. Count the cash in each drawer and corresponding drop box and
reconcile to register reading. Note any discrepancies.
3. If a cash variance is observed for $X or more during the cash
counts, call the Market Manager, Internal Audit and the Marketing VP
and notify them of your findings.
B. Cash Handling Procedures
Objective: To ensure that the internal controls for cash handling are in
place.

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Project Work Step

Perform the following audit steps to determine the existence and
effectiveness of the following cash control procedures. Document the
results of your work in the audit report.

Initial

1. By observation, determine that the safe is locked at all times, not

just on day-lock.
2. By observation, determine that the safe does not contain more than
one days deposit.
3. By observation and inquiry, determine that the safe combination
and restaurant keys are only in the custody of Restaurant
Management.
4. If there has been a recent change in Restaurant Management,
verify that the safe combination and restaurant locks have been
changed.
5. Document the exact procedure each restaurant uses for making
bank deposits. Specifically, identify the deposit method being used,
the distance depositing banks are located from each restaurant and
the average time required to make a deposit (restaurant to bank to
restaurant). Compare with other restaurants in the district and
comment as to the effectiveness and efficiency of the restaurants
depository banking procedures.
6. Verify that drop boxes are being used in accordance with Company
policies and procedures. Cash drops should be made whenever the
total cash amount in the register reaches $X. Regional policy may
require lower cash deposit limits. Confirm that bills greater than $X
are deposited immediately in the drop box.
7. Verify that all voids and refunds are being approved by a Manager
within X hours or within the same meal period of the occurrence. In
addition, all voids or refunds should be explained, approved and
signed by the Restaurant Manager and cashier.
8. If there are void problems, trace five voids selected for each
restaurant during the Regional Office review to the X Journal and
ensure that there is a(n):
a. Original Order
b. Voided Order
c. Re-ring Order
9. While reviewing the X Journal, review for the following:
a. Senior Citizen discounts
b. Kids sales without a parents entree meal.
c. Any promotional items (i.e., 15% discounts).
d. Management and Employee discounts.
10. Verify, by observation, that only one cashier is working out of each
cash register.
11. Verify that the cashiers and Managers are signing the Weekly
Over/<Short> Log. Scope: one week plus current week.
12. Agree the Weekly Over/<Short> Log balance to the net
over/<short> reported on the Daily Cash and Sales Report. Make sure
that the cashier consistently signs the Weekly Over/<Short> Log and
Clerically test all variances each day. Scope: One week plus current
week. Note exceptions.
13. Confirm that no cash is bought or exchanged between cashiers.
14. Confirm that the cashier and the Manager count the cash before
and after each shift.
15. Verify that random cash audits are performed weekly by the
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Manager for each cashier.

Initial

C. Inventory
Objective: To ensure that the physical inventory count is complete and
accurate.
1. If the audit is performed (insert day) night or (insert day) morning:
a. Perform a test count on at least X inventory items which represent
a minimum of X% of the inventory dollar value (meat and seafood). If
any material discrepancies are noted, double the sample size. If
additional discrepancies are found in the expanded scope, X% of the
inventory must be counted.
b. Agree test counts to the inventory forms submitted for processing to
(company) Regional Accounting.
2. Ensure that all food in the refrigerator/freezer is properly covered
and stored on the floor, in accordance with (company) Food
Procedures.
3. Verify that the product observed in restaurant is consistent with
approved products listing previously obtained from (company)
Purchasing Department. Note discrepancies.
4. For those restaurants with high food costs, review for poor
inventory controls (e.g., organization, sloppiness, dirtiness, numerous
open cases and same items stored in different locations, etc.)
D. Accounts Payable
Objective: To ensure that all invoices are current and authorized and
to ensure that all expenditures are substantiated by an approved
invoice.
1. Ensure that all invoices at the restaurant are current (within one
week).
2. Ensure that all invoices are signed by Restaurant Management,
noting agreement of product received.
E. Payroll
Objective: To ensure that all employees who are minors abide by
federal, state and local regulations.
1. Minors
a. Review the Minors List to ensure that no minors, under the age of
18, are operating dangerous machinery (e.g., mixers, slicer, chopper,
tenderizer, etc.)
b. All minors must have work permits or certificate of high school
proficiency or high school diploma, if required by State Law.
c. Minors still in school may not work more than X hours in one day, X
hours on a school day or X hours in a week. Minors who do not attend
school, must attend continuation classes and cannot work more than
four hours on school days.
F. Employee Discounts
Objective: To ensure that all restaurants are providing discounts in
accordance with (company) Company policies and procedures.
1. Review employee discount and other discount policies and
procedures so that we may develop an effective audit review.
a. How are discounts handled at each restaurant:
What percentages are used?
Are approvals and verifications performed?
Is a Management key required?
b. Identify the presence/absence of controls within each restaurants
system.

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c. Note suggestions for alternative methods to each system.

Initial

G. Safety
Objective: To ensure that all restaurants abide by Risk Management
safety and security procedures.
1. Conduct an insurance review as outlined in the Work Program
provided by the Director of Risk Management and follow-up on any
deficiencies.
a. Are employees using safety gloves when cutting food products or
using the slicer?
b. Are floors wet, slippery? Should mats be used?
c. Are all required OSHA signs, informational posters and incident
reports posted?
d. Monthly Lesson Plan and Sign-up Sheet posted?
e. Are claims reporting procedures followed?
f. Are restaurants following monthly inspection procedures?
g. First Aid Kits readily accessible and adequate?
h. Fire alarms certified and tested annually? Fire extinguishers
recharged regularly and mounted in readily accessible areas?
H. General
1. Complete the Restaurant Visit Checklist.
2. Conduct a qualitative observation and review, from the perspective
of the customer, of the restaurants operations, including but not
limited to:
Service

Cleanliness

Food Handling

Employee Attitudes, etc.

Paperflows

Depository Banking Procedures

Determine if the bank is at the most convenient location to the

restaurant. Document your findings in the audit report.
3. On a scope basis, ensure that those items which are significant to
(company)s concept are provided by the authorized vendors (see
section II.T.).
(insert item)
IV. POST AUDIT

(insert vendor)

A. Prepare a draft of the report for the closing conference. Note any
restaurant(s) which had deficiencies in most audit areas.
B. Conduct a closing conference with the Marketing VP, Market
Manager and the Regional Accountant to answer any questions.
C. Upon your return to the Corporate Office, review the report for
distribution to the Marketing VP for their formal response. Review the
report for the following:
1. Spelling, punctuation, tense
2. Consistent capitalization and non-capitalization
3. Proper dates
4. Correct page numbers and exhibits
5. Consistent titles/names throughout the report
6. Proper titles, closing conference attendees
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7. Distribution correct
8. Charts aligned and centered
9. Paragraph alignment

Initial

10. Underlining, bolding, italicizing consistent

11. All exhibits agree and tie to report
12. Restaurant numbers in order
D.
Prepare the Executive Summary for Kevin Perkins.
E.
Prepare work papers and files by including the following:
1.

Name and location of the market audited.

1.
2.
3.

Period of time the audit took place and audit team.

Auditors initials, date, source and scope on the workpapers.
Second review of the workpapers and report draft.

4.
5.

Disclosure of all audit points.

Complete references of workpapers and reports.

F. Revise the work program each time a new audit point or step has
been located or if changes have occurred in the field.
G. Send an Audit Survey to the auditees for comments.

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