Question

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.
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.

Answer 1

1&2) Strengths in HARDA's sales transaction controlling system are:

• Segregation of duties: No two work are done by same person. If one person is recording the sale the other is entering in cash register and collecting cash.
  Advantage/ Problem solved: when work work is done by different individual there are less chances of intentional fraud as work is being checked by other person simultaneously. There is a sense of responsibility in every individual to give their true and best.
• Staff is a mix of Experienced head and young leaning assistants who are paid differently as per their scale.
  Advantage/ Problem solved: The Hourly wages plus sales volume based commission will motivate the assistants to work hard and with determination they would work with customers . There remains a spark in them to do more and more work and get promoted and recognised.
• Use of Unsophisticated(customised) cash register with four parts sales invoice to record each financial transaction
  Advantage/ Problem solved: This involves proper recording of transaction with no confusion to any new entrant. Classification and clarification on each and every detail on same peice of paper. And availability of invoice at each required place will enable the quick response service to customers.
• Cash register is mechanically operated and automatically assigns a consecutive number to each transaction
  Advantage/ Problem solved: This reduces the chances of any missing receipt or embezzlement of money by any sales operator. Any further requiremnt of invoice can be quickely soved with proper numbering of receipts and easy availabilty.
• 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.
  Advantage/ Problem solved: Reconcillation of cash registers on daily basis always provides true and fair picture of financial transactions and any clerical error could be noticed and corrected.
• Maintenance of data in central data processing department at corporate headquaters and weekly performance report provided by the department.
  Advantage/ Problem solved: Regular performance review by manager provides a check on activity of assistant and a room of improvement to assistant to work harder and earn more commission and also opens different ways to practice while working.

Note: I have answered part 1&2 of answer in same points. For other points please make a diferent question.