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    Auditing Control Organization Assignment Help

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    Auditing Control Organization Assignment Help


    AUDITING CONTROL ORGANIZATION

    Executive Summary

    This study deals with auditing and control system that helps to ensure the validity of accounting information, product and service quality of a company. Regarding present system in Jertsy Ltd, a range of weakness factors is there. Risk in business transparency, accounting and financial reports, staff inefficiency and employee turnover are some of the negative issues within this company. This study is going to shed light on audit assertion of SS Ltd. Company, which is involved in increasing their warranty from 3 years to 5 years. Estimation of warranty provision also increased into this company. According to relevant audit assertion, managerial faculties of this company assess substantive procedures.

    Introduction 

    Auditing and control system is an essential element within an organization to ensure the relevancy of accounting information and product or service quality. Based on organizational situation and contemporary but dynamic business environment, audit experts have proposed various auditing standards, audit procedures and its techniques. It is also to be noted that implementation of an adequate auditing practice enables an organization to put control over its employees and stakeholders by managing present situations. 

    In this research study, researcher has analyzed various auditing measures for the provided case scenarios. The first case study provides some internal information of an Australia based fashion clothing store, Jertsy Ltd and the second one analyses present situation within Sweet Sounds Ltd. The second one is also an Australia based company which manufactures some mini hi-fi systems. Analysis of these two case studies and evaluations of various concepts of audit systems enables this study to identify weakness within the ongoing system of these two organizations. Researcher has optimized the entire study intending to provide detailed information regarding audit and control within an organization by considering the two above mentioned cases. 

    Analysis 

    Question 1

    Identification and explanations of weakness within present system of Jertsy Ltd 

    As per case scenario of Jertsy Ltd, managers of each store have been allowed to conduct buying and selling operations by selecting quantity and types of products by their own. In this context, head office has not been implementing any control to it apart from establishment of a standard mark upon product cost. It is also to be mentioned that, store managers have to use these standard costs to arrive at the selling price of products. Moreover, a significant staff turnover rate has also been noticed for this organization, though it has not been able to lead any effect on the business of this company. This is because; Jertsy is being able to provide contemporary products for youth fashion. 

    It is also known from this case study that, a monthly management report made by a professional account is sent to the head office by each store managers which includes both sales and purchases along with local sundry expenditures. Hence, based on this discussion, some weakness can be identified for the present business system within Jertsy Ltd, these are: 

    A business demands establishment of transparency within work process and it ensures maintenance of business ethics between various departments or stores of an organization. According to Knechel & Salterio (2016), maintenance of proper control over subordinate shops is necessary as it produces a better opportunity to bring unity within the business process. This opinion has been supported by Omolaye & Jacob (2017), which states that, if head office is providing control over subordinates, then company objectives can be shared adequately. Moreover, it also establishes transparency within business process by monitoring work process of subordinate managers and other employees. Thus, based on this discussion, it can be concluded that the first risk for this organization is generating form non-interruption of senior managers in the working process of stores and it is also decreasing business transparency for it. 

    Weakness 2: Product price

    The second weakness is related to product price and this is also generating from uncontrolled activity of store managers. As commented by Inauen et al. (2015), while participating in selling activities through various outlets or different selling mediums, senior managers must be focused to maintain price uniformity for all selling mediums. Achievement of a better business turnover requires attainment of customer satisfaction and cost is an important element to attain a high level of customer satisfaction. In the viewpoint of Krishnan et al. (2018), reasonable or low product price not only satisfies customers but also enhances trustworthiness and business relevancy of a business body. Thus, consideration of expert opinions speaks for establishment of a proper price structure for each product and each outlet. 

    Furthermore, this suggests for authorization of proper communication between senior managers and store managers. Based on the case study, it can be stated that higher authority has not shown any interest on price structure implementation and is providing only a standard mark up cost for those fashion clothing stores of Jertsy Ltd which are situated within the state capitals of Australia. Thus, un-interruption of higher authorities provides scope for these store managers to fix prices according to own interest. Thus, it is an increasing chance of price inequalities. As commented by Cameran, Ditillo & Pettinicchio (2017), maintenance of a proper pricing strategy is necessary for a business and this effects positively on profit margins, sales volumes, business positioning. Rogulenko et al. (2016) have illustrated the above statement by adding two more factors with is, such as market share and competitive advantage. 

    Hence, it can be stated that, as a proper pricing strategy is not being maintained within this company by higher authorities, it may lead to a decrease in sales volumes and profit margin for it. Furthermore, it is also to be highlighted that, such inequalities in price structure is also responsible to diminish the opportunity of gaining competitive advantages over other fashion cloth selling companies. 

    Weakness 3: Staff efficiency

    It is always to be considered that a business is based on its employees and a little problem within this can cause major disruption for a company. In the words of Berry, Broadbent & Otley (2019), various types of employees are needed to construct a suitable and fruitful business operation process and among these types, managerial staffs and store employees are most important for a clothing business. It is also to be mentioned that, efficiency level of an experienced and trained employee is always higher than a group of new and inexperienced employees. In this context, nature of employee efficiency can be judged by considering the opinion of Rikhardsson & Dull (2016). According to this opinion, if an individual has determined to perform a part-time job, an issue related to job involvement and work level can rise. 

    This is because; a mentality of working within a workplace for only a certain period restricts most of the employees to provide entire effort for assigned job. In the provided case, outlets of Jertsy Ltd which are present in the capital cities of Australia are engaging a lot of young employees within work process. Thus, alignment of this case study with the above mentioned expert opinion shows that there must be an issue related to employee efficiency within the work process of these outlets. Furthermore, there is also a chance of engagement of untrained employees within business premises. Thus, it can be stated that a group of inexperienced and untrained employees can be a reason of unsatisfied customers and this may results in a decreased rate of sales volume.  

    Weakness 4: Significant rate of employee turnover

    In order to identify this issue within Jertsy Ltd, an individual has to gain some information about the concept of employee turnover rate. A brief but understandable definition of such rate can be received from the research of Calderon, Song & Wang (2016). As per these words, employee turnover rate implies a rate in which employees are leaving an organization on a yearly or monthly basis. It is more to be added to it that, various reasons can be present behind such migration such as better job offer, better salary or better work environment. This incident can lead to some disadvantages for concerning organization though there are also some chances for gaining advantage [Refer to Appendix 1]. 

    A high employee turnover rate allows an organization to engage more employees as per necessary and it also creates a provision for concerned company to decrease employee number if there is a necessary. Furthermore, it is responsible for increase difficulty level while establishing a better customer relationship or employee loyalty. As represented by Abou-Seada & Abdel-Kader (2017), an increase in the sales volume demands a better relationship between employees and customers and it is also responsible to establish a better employee loyalty. Moreover, the major drawback of higher employee turnover is related to cost of employee selection and recruitment process and instability within workgroups. 

    In case of Jertsy Ltd, a large number of young employees are doing a part-time job in various cloth selling stores of this organization in the Australian capital cities. Thus, it can be stated that a lower level of team working aptitude can create dissatisfaction within customers and it may decrease its sales volume. Though in the present situation, a higher rate of employee turnover is not affecting its business due to existence of fashion collections in the product list of this company, it may cause a serious issue in the business expansion process. 

    Weakness 5: Accounting and other financial reports 

    Maintenance of proper financial records is necessary for any business process because a lot of financial transactions are needed to be performed within such a business process. According to Donelson, Ege & McInnis (2016), proper accounting and measurement of financial reports enables an organization to plan a budget and is also helpful to keep records in an organized way. In this connection, Joe, Vandervelde & Wu (2017), has stated that a time-wise accounting statement is helpful for decision-making process and to calculate profit and these are necessary while expanding business. In the provided scenario, managerial authority of Jertsy Ltd are thinking for business expansion and in this context, organized accounting and financial reports can be helpful to justify the statement of business expansion. 

    This case study also states that cloth stores of this organization which are located in the capital cities of Australia are maintaining accounts every month and these reports are being sent to the responsible senior managers of concerned organization. Hence, an issue of lack of transparency can be raised while preparing such financial records. Moreover, it is also to be noted that, as there is no proper communication between senior managers or other responsible bodies of Jertsy Ltd with store managers, it may result in some mismatch in accounting variables. 

    Improvements to bring control over identified weaknesses 

    More stores are needed to be opened for business expansion of Jertsy Ltd and it demands involvement of a group of new employees to serve more customers. Thus, based on the above discussion, it can be concluded that the major issue that is going to be faced by this organization in the business expansion process is related to two major components, such as involvement of higher managerial authorities in the business operation of various stores and employee efficiency level. Therefore, after analyzing weaknesses of Jertsy Ltd and after aligning it with adequate concepts, some solutions can be drawn that are helpful to mitigate these problems. The following table provides these solutions:

    The client of Sweet Sound Ltd. is a manufacturing company of mini hi-fi system. This company in intended to change overall production process and make it more reliable. Consequently, each product of SS Ltd is required to increase warranty. Audit assertion comprises of some procedures that are usually applied by auditors for testing various guidelines. As opined by Nalewaik & Mills (2015), investigation of company policies, financial reporting process and internal controls are covered by this department. In general, these assertions are some implicit or explicit representations or claims, which are made by management body of a company. During preparation of economic statements, finance managers of SS Ltd apply audit assertions. In relation to increase sale of mini hi-fi system, increment of warranty period is necessary. Claims related to new product were reduced by 20%. Compared to the previous product, these acclamations are necessary. According to Schillemans & van Twist (2016), audit assertion can be classified into three categories, such as account balance, components of transactions, disclosure and presentation. 

    Assertion of account balance is pertaining to end of periodic balance sheet account such as liabilities, equity balance and assets. As stated by Graham (2015), assertion of transaction classes are applied for various income-statement accounts. Stages of audit assertion for warranty of SS Ltd are 

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