Background

Dolphin Group Limited (Dolphin Group) owns and operates 21 ‘high-tech leisure’ hotels in major cities across Australia and the Caribbean. Dolphin Group is listed on the Australian Securities Exchange (ASX). It presents its consolidated financial statements in Australian dollars (AUD) and in accordance with International Financial Reporting Standards (IFRS). Dolphin Group consists of Dolphin Ltd (the parent) and its wholly owned subsidiary, Fun Season LLC (Fun Season). Dolphin Ltd operates four-star hotels across Australia, with a functional currency of AUD. Fun Season operates five-star resorts in the Caribbean and its functional currency is the United States dollar (USD). Fun Season prepares its financial statements to meet local reporting requirements in accordance with US Generally Accepted Accounting Principles (US GAAP).

Dolphin Group’s hotels have wi-fi with high-speed internet, contactless payments and self-check-in terminals. They also have concierge robots with check-in and luggage-handling features, robot vacuum cleaners and robots delivering items to guests or collecting laundry and dishes. Guest smartphones can integrate with ‘Internet of Things’ appliances such as voice-controlled room lighting and sound, smart televisions, personal streaming service subscriptions and the Dolphin Experience app. Guests are not required to pay extra for any of these technological conveniences.

You are an audit manager at Heart Audit Inc (Heart Audit), working on the external audit of Dolphin Group for the year ended 31 December 2022. Heart Audit has been Dolphin Group’s auditor for the past two years.

It is now December 2022 and you are preparing for the post interim planning meeting, which is scheduled for early January 2023, before the audit’s substantive phase starts.

Operational changes

All Dolphin Group’s hotel bookings are made through a holiday booking website (lysis.com), run by technology company Exon Lysis Ltd (Exon Lysis). From 1 January 2022, Dolphin implemented a new hospitality management system and accounting software, also developed by Exon Lysis. These software applications integrate with each other and with the booking website.

Dolphin Group also switched to a technologically advanced, self-service check-in system. This change had a major impact on the company’s operations and accounting processes. It purchased a significant number of check-in robots and terminals and installed these at all their hotels. Guests check in by interacting with a concierge robot or by using a terminal in the hotel foyer. Each hotel has a human concierge host on duty around the clock for the rare occasions that guests require personal help.