Companies can gain efficiencies by implementing effective ongoing monitoring of their internal control processes. Identify the...

Companies can gain efficiencies by implementing effective ongoing monitoring of their internal control processes. Identify the important onging monitoring procedures that an organization might use in assessing its controls over revenue recognition in each of the following situations:

a. A convenience store such as 7-Eleven

b. A chain restaurant such as Olive Garden

c. A manufacturing division of a larger company that makes rubberized containers for the consumer market

Solutions

Expert Solution

a. A convenience store (for example 7-Eleven) need to be an adequate monitoring procedure for the cash receipts, customer returns, sales, and promotional reductions on a daily basis. Any unusual variances need to be explained and investigated. Moreover perform surprise cash counts, and track purchases by employee for any unusual activity

b. A chain restaurant (for example Olive Garden) focuses on cost and quality, with some specialty chains adding flexibility by carrying a wider range of commodities that may be targeted towards interest of customers in organic products or ethnic cuisine. An effective control strategy must maintain freshness, hence perceived quality and increase revenue. It should be must be responsive by receiving produce quickly to ensure a high service level and offering a freshness quality.

c. The risks in business change over time in a manufacturing division of a larger company. The internal control system must be capable of determining that the internal controls are effective and in place for addressing new risks. The process of monitoring need to be capable of addressing the requirements for revisions in the control design based on changing risk. An efficient internal control system should be capable of containing risks at an acceptable level to ensure efficient and effective and operations on an on-going basis

ekkarill92 answered 2 months ago

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