Question

In: Accounting

HARDA Fashion sells ready-to-wear fashion clothes to teenagers. The company has a 20-store chain concentrated in...

HARDA Fashion sells ready-to-wear fashion clothes to teenagers. The company has a 20-store chain concentrated in the north-eastern part of the United States of America. Each store has the experienced full-time staff consist of a manager and an assistant manager. The full-time staff is paid a fixed salary. The full-time staff is assisted with a cashier and a sales assistant who have comparatively less experience. The cashier and sales assistant are paid hourly wages plus the commission based on the volume of sales. HARDA Fashion uses unsophisticated cash registered with four-parts sales invoice to record each financial transaction. These sales invoices for the sales transaction irrespective of the payment type. The record-keeping starts with the sales assistant on the sales floor. The sales assistant fills the sales invoices manually by providing the following information: 1. Records his or her employee number. 2. Enters the transaction details including clothes item number, description, quantity, and the unit price. 3. Totals the sales invoice. 4. Calculates the discounts manually when appropriate. 5. Calculates the sales tax. 6. Finalise the sales invoice after calculating the grand total. The sales assistant then forwards the sale invoice to the cashier and keeps one copy in the sales book. The cashier reviews this sales invoice and enters in the cash register. The cash register mechanically validates the invoice, automatically assigning a consecutive number to the transaction. The cashier is also responsible for getting credit approval on charge sales and approving sales paid by cheque. The cashier gives (1) one copy of the invoice to the customer, (2) retains the second copy as a store copy, and (3) the third for a bankcard, if a deposit is needed. Returns are handled in exactly the reverse manner, with the cashier issuing a return slip. At the end of each day, the cashier sequentially orders the sales invoices and takes cash register totals for cash, bankcard, cheque sales, and cash and credit card return. These totals are reconciled by the assistant manager to the cash register tapes, the total of the consecutively numbered sales invoices, and the return slips. The assistant manager prepares a daily reconciliation report for the store manager’s review. HI5019 TD2 2020 Assessment 1: Individual Assignment 3 The manager reviews cash, cheque, and credit card sales and then prepares the daily bank deposit (credit card sales invoices are included in the deposit). The manager makes the deposit at the bank and files the validated deposit slip. The cash register tapes, sales invoices, and return slips are forwarded daily to the central data processing department at corporate headquarters for processing. The data processing department returns a weekly sales and commission activity report to the manager for review. Required Prepare a report to Chief Executive Officer of HARDA Fashion to evaluate its processes, risks, and internal controls for its revenue cycle. In your report, you need to include the following items: 1. Identify six strengths in HARDA’s system for controlling sales transactions. 2. For each strength identified, explain what problem(s) HARDA Fashion has avoided by incorporating the strengths in the system for controlling sales transactions. 3. Identify two situational pressures in a company like HARDA Fashion that would increase the likelihood of fraud. 4. Explain why some companies would choose to install a distributed computer system rather than a centralised one.

Solutions

Expert Solution

1. Six strenghts are:

  • Sales team is young and is employed on the basis of saalry based on sales volume
  • Each transaction is reocrded in 4 part cash flows.
  • Recording a sales is two man job of salesman and cashier
  • Sales returns are handled effeciently
  • A reconcilliation report is prepared on daily basis
  • Sales and commission report are generated on regular basis

2. Problems avoided because of above mentioned strenghts sequentially are:

  • Having a young team on incentive based compensation reduces the service time and gives incentive to work more to the workforce. This solves the problem of queing and letargic behaviours of employees
  • It helps in training new employees, avoides chances of error and solves problem quicker.
  • This avoids chances of error and fraud from salesman who can input wrong sales amount to increase his commission amount.
  • This helps the customer by solving their issues faster and gives the company a good name.
  • Reconcilliation report helps the manager to identify issues in the stores, manage sales figures and check the sales figure wrt cash and bank balances.
  • It avoids the problem to wait for year end to review the performances of stores and eliminate any weaknesses sooner.

3. Likelihood of fraud increases when employee such as sales assisstance has monetary problems and his commission on sales is not getting high. Another situation can be when sales quotas are not been achieved of stores and store manager reports wrong sales figures.

4. Distributed system reduces the chances of fraud as the work is distributed and for the fraud to happen two or more persons needs to collide with each other. In centralised, dependency on one person increases and in event of his absence from work the whole system can get affected. Further in distributed system, more detailed reports can be generated focusing on each units performance.

Dear student, hope this helps. Kindly note that expert here is required to give outline answers only. Please reframe the answer in your own words as per your assignment requirement. Thanks


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