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Internal control weaknesses in Bucks Phyz

Discuss about the Various Issue in Bucks Phyz Company.

Bucks Phyz is one of a medium sized organisation that possess annual turnover of $2.5 million. The question, which has been asked in this question, is to represent a business report of the Bucks Phyz reviewing the sales process of organisation. The report has reviewed the company profile closely and while doing so, it has been found that the firm has gone through major reform in the operating environment. The study of the Bucks Phyz’s internal organisation, it has found that account department of the firm has been facing fraudulent behaviour and if the trend continues, then firm will not be able to earn higher profit (Johnson, 2016). Thus, the manager of the firm has been asked to his newly employed accountant to check revenue leakage and analyze what can be done in order to control the situation. Besides this, the new accountant is also asked to perform risk analysis of introducing corporate credit card for the Bucks Phyz. This report is meant to provide the internal control analysis of Bucks Phyz and study the feasibility of introduction of corporate credit card for the firm.

Bucks Phyz is one of a middle-sized firm in the Australia that has recently gone through an organisation restructure in order to meet the market standards and overcome the issues of fraud in firm’s activity. Bucks Phyz follows the new pricing tool of the business process that can calculate offer prices accurately, which are introduced by the managers of the firms to attract more customers (Marinesi, Girotra & Netessine, 2017). However, the business has faced issues with the authorization policy, which is not aligned with manager’s policy making it ineffective. Barry, who is head of sales of the Bucks Phyz argues that due to lack of proper mapping of the introduction of the new pricing tool in the organisation, existence of standardized process and the particular process has meshed with each other. Besides this, standardized offer template of the firm available in the website of the Bucks Phyz is not up to the benchmark (Kumar & Arpana, 2016). In terms of quality of the credit checkout process, it can be said that there is lack of credit worthiness and it returns C quality rating of the credit. Customer template available in website is not alluring too leading the firm to face lower demand for their service.

Recommendations

Analyzing these factors, various internal control weaknesses of Bucks Phyz have found, which are mentioned below.

Sales process

Internal control weakness

Impact

Recommendation

Data Entry Process

Data entry process is one of the major issues related with the Bucks Phyz. Lack of information regarding the access to the ERP system has  reduced the cast benefit ratio for the firm. Besides this, billing system of the firm does not supply any guidance to the users making it unworthy (Balsam, Jiang & Lu, 2014). Moreover, pricing template of the firm is irrational and cost benefit ratio is not justified for the Bucks Phyz.

ERP access to all the employees need to be restricted because it can lead to fraudulent activates (Shen, Chen & Wang, 2016). Wrong data in the wrong field has hampered the assessment program and the cycle of auditing the Bucks Phyz business, which has reduced the efficiency of the firm’s internal control.

Managers should segregate the duties of the workers and employ such workers who are able to insert data properly in proper field of the template. Billing software of the firm need to be updated so that both the employees and the user can get benefits from  it and it become easy for them to handle the order.

New Pricing Tool

The new pricing tool that has been introduced in the Bucks Phyz is not aligned with the manger’s policy. Employees are not well skilled and trained to handle the software smoothly.

New software for pricing is not an easy one to handle without any proper training and instructions. Thus, it has hampered the growth of sales for the firm. If the trend continues, then it will lead to a devastating situation for the firm.

The deterioration of sales of the Bucks Phyz due to the introduction of new pricing tool can easily be overcome with proper training. Mangers can introduce new strategies to educate their employees and align the manger’s policy to overcome the conflict.

Policy Of Authorization

Bucks Phyz has a standardized policy for the authorization, however most of the managers does not mandatorily follow the rule (Yang et al. 2014).

When it comes to non-compliance with the standardized process, it gives the managers an opportunity to indulge themselves into the fraud activities (Gino & Ariely, 2015). Head of sales has pointed out that activities has caused the Bucks Phyz a reduction in revenue in recent days.

Bucks Phyz need to bring in modified policy of authorization that should look into all the factors that it can stop the managers to indulge themselves into fraud activities.

Process Of Credit Check

Process of Credit Check by the Bucks Phyz has no issues; however, according to Lucinda there are various instances, where the sales team does not follow the process. In several cases, it has been found that credit checking has been done after the issue of invoice.

There is a scope of loss of revenue for the firm, if it continues to sign the credit check process after issuing the invoice.

It should be made mandatory for the sales team to adhere with the process of credit check. Managers should bring in penalty in case of avoidance of credit checking, which will bring in efficiency among the employees and adherence with the standard rules of the firm.

Employee code

Bucks Phyz does not have any employee code that hampers both the code of conduct of the employees in the firm. It aids to growth of personal relationship among the employees, which is not beneficial for the performance of the firm.

Lack of employee code in the Bucks Phyz can act as the stimulus to the growth of personal relationship (Vaní?ková, 2017). This will enhance the interest conflict and chances of fraud can be aggravated.

It is advisable from the accountant’s perspective to introduce a employee code, which can mitigate the scope of conflict and fraud activity in the firm.

Bucks Phyz has various issues with its structure and business process. Primarily, the firm lacks credit worthiness, when it comes to their service and online template of the firm; it is not alluring enough to attract new customers. Moreover, the Bucks Phyz credit rating comes under the C category making it unworthy in the market (Kraft, 2015). Interviews of the staffs of Bucks Phyz has portrayed that the firm has serious issues in its account section leading to reduction in revenue earning. Thus, it is highly important for the firm to introduce new methods to check these issues and address the leakage in accounting section.

Introducing corporate credit card is a good option for the business to enhance their market share (Audi, Loughran &McDonald, 2016). This card will make the reimbursement process more simplified and the payment transferring will become easy. However, introducing the corporate credit card will bring higher amount of risk and in absence of proper code of conduct, it will lead the employees towards higher amount of fraud activities (Outwater & Redmann, 2015).

Corporate credit card need to be introduced to only those persons who are related with the core business of the Bucks Phyz. It will reduce the scope of fraud activities by the employees of the firm and enhance the performance of internal controls (Hilas, Mastorocostas & Rekanos, 2015). Finance department need to be tasked with authorisation capability and it will minimize the issues with internal controls.

Various steps can be taken by the manager in order to reduce the scope of fraud in the firm and make the control mechanism more sophisticated. Recommendation for the Bucks Phyz is as follows:

  • Bucks Phyz need to enhance its internal control mechanism by introducing code of conduct for the employees
  • Introducing appraisal mechanism would be beneficial for the firm to encourage its workers
  • Need to upgrade its online template for sales and make it more alluring to attract more customers
  • There should be a training and quality analysis team who will be tasked to maintain the performance of the workers

Conclusion:

The report has analyzed the internal control of the Bucks Phyz and has performed feasibility check to introduce corporate credit card for the firm. The findings of this report highlights that the firm is facing risk from their organisational structure and the chances of fraud activity is high due to lack of proper internal controls. In order to overcome this, the report has mentioned various recommendations that the firm need to implement with immediate effect. When it comes to the introducing corporate credit card for the Bucks Phyz, then the report finds that it will be a good opportunity for the firm to enhance its business, however, it need to be issues to the key human resource personnel in order to avoid the scope of fraud

References:

Johnson, M. (2016). Demystifying Communications Risk: A Guide to Revenue Risk Management in the Communications Sector. Routledge.

Marinesi, S., Girotra, K., & Netessine, S. (2017). The operational advantages of threshold discounting offers. Management Science.

Kumar, M. S., & Arpana, M. (2016). Survey on Search Engine Optimization Techniques to Achieve High Page Rank. Imperial Journal of Interdisciplinary Research, 2(8).

Shen, Y. C., Chen, P. S., & Wang, C. H. (2016). A study of enterprise resource planning (ERP) system performance measurement using the quantitative balanced scorecard approach. Computers in Industry, 75, 127-139.

Balsam, S., Jiang, W., & Lu, B. (2014). Equity incentives and internal control weaknesses. Contemporary Accounting Research, 31(1), 178-201.

Yang, Y., Chen, X., Wang, G., & Cao, L. (2014, December). An Identity and Access Management Architecture in Cloud. In Computational Intelligence and Design (ISCID), 2014 Seventh International Symposium on (Vol. 2, pp. 200-203). IEEE.

Gino, F., & Ariely, D. (2015). Dishonesty explained: What leads moral people to act immorally.

Vaní?ková, R. (2017). Employee privacy protection versus interests and property employer. International Journal of Law and Management, (just-accepted), 00-00.

Kraft, P. (2015). Do rating agencies cater? Evidence from rating-based contracts. Journal of Accounting and Economics, 59(2), 264-283.

Audi, R., Loughran, T., & McDonald, B. (2016). Trust, but Verify: MD&A Language and the Role of Trust in Corporate Culture. Journal of Business Ethics, 139(3), 551-561.

Outwater, C. S., & Redmann, W. G. (2015). U.S. Patent Application No. 14/017,491.

Hilas, C. S., Mastorocostas, P. A., & Rekanos, I. T. (2015). Clustering of Telecommunications User Profiles for Fraud Detection and Security Enhancement in Large Corporate Networks: A case Study. Applied Mathematics & Information Sciences, 9(4), 1709

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My Assignment Help. Internal Control Analysis And Feasibility Of Introducing Corporate Credit Card For Bucks Phyz [Internet]. My Assignment Help. 2019 [cited 19 July 2024]. Available from: https://myassignmenthelp.com/free-samples/various-issue-faced-by-bucks-phyz-company.

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