ROASTERS, INC. (Audit Report Summary) Comments and Concerns: (Condition, Cause & Effect)
Green Mountain Coffee Roasters, Inc. is
considered as a large scale organization because of its multiple product lines, across the country transactions and market share but it only employs 250 full-time and part-time employees to oversee the operations. Inadequate number of employees not only hurts its ability to maximize opportunities, but can also create problems that can lead to serious financial consequences. It can create problems to customers when they dont get timely answers to their questions, receive poor customer service or have to wait longer than normal for delivery of product. When this happens, it might lose customers, lose references and the ability to attract new customers and reduce revenues enough to damage the business. Criteria: (Established Procedures/Best Practices)
1. Large scale organization should have greater
than or equal to 250 employees, regardless of revenue. 2. A large-scale organization retains substantial revenue in the millions of dollars. Revenue refers to income that has been earned by an organization. Large-scale organizations typically maintain a large market share and therefore earn a large profit from its customers. 3. These assets can include machinery, equipment, materials, locations, property and stock. Large-Scale Organizations require a substantial amount of assets to maintain production and operations. 4. Large-scale organizations are typically based in multiple locations, meaning they operate outside of their main location. It can include separate branches, divisions or plants of the same organization, which could be located domestically or internationally. An organization operating internationally means that organization a transnational or multinational corporation. Large-scale organizations also have a complex management structure involving multiple levels to manage all operations and employees. This involves multiple levels of management with different responsibilities, authority and power. Recommendations: (Proposed Solution)
Green Mountain Coffee Roasters, Inc. should hire more
employees adequate for their operational needs. Additional costs will be incurred for additional manpower but in return, it results productivity that will increase profitability. When the level of manpower is adequate, the business has more options in how it operates. It has some flexibility in terms of which employees cover shifts. It is easier to get people to fill in. The company also has a greater pool of workers with which to construct strong teams and is more likely to have employees with the skills, knowledge and abilities to tackle current company problems. Additionally, the company has more employees who can give their own ideas and perspectives. It therefore may have an easier time remaining innovative and competitive. Comments and Concerns: (Condition, Cause & Effect)
Green Mountain Coffee Roasters accounting system
consists of manual procedures supported by stand-alone PC located in various departments. Computers are not networked and they cannot share data digitally. All interdepartmental communication is through hard copy document. The company failed to adapt innovation through the use of modern technology. Inadequate technology puts businesses at a competitive disadvantage, lowers employee motivation, and leads to inefficient work practices. The company cannot increase their employees' productivity because of outdated office equipment used in their operations. Processing of purchase requisitions until payments will require a long process. Interdepartmental communication will take time and work efficiency will suffer. They cannot easily connect with their suppliers across the world and it will be hard for them to reach out new economic markets. Criteria: (Established Procedures/Best Practices)
Business technology helps
companies conduct business easily. Large businesses use computers, servers, websites and personal digital products to develop competitive advantages in the economic marketplace. It also helps automate back office functions, such as record keeping, accounting and payroll. Another is companies use technology to create secure environments for maintaining sensitive business or consumer information. It can help improve their communication processes. Emails, texting, websites and personal digital products applications, known as apps, can help companies improve business communication. Using several types of information technology communication methods allow companies to saturate the economic market with their message. Companies may also receive more consumer feedback through these electronic communication methods. These methods also allow companies to reach consumers through mobile devices in a real-time format. Rather than just selling consumer goods or services in the local market, they can reach regional, national and international markets. Recommendations: (Proposed Solution)
GMCR should acquire new computers and other
modern office equipment that should be placed in various departments. Computer programs and business software will allow their employees to process more information than manual methods. They should also implement business technology to reduce the amount of human labor in business functions. It will avoid paying labor costs along with employee benefits. Creating computer systems would make their company a paperless environment convenient for the employees and lesser cost for the company. Comments and Concerns: (Condition, Cause & Effect)
The company employs a single person (Sara) who
handle inventory management in the warehouse, reviews inventory ledger to identify inventory needs, prepares purchase requisition, files purchase requisition and sends copy to accounts payable, prepares four-part purchase order using purchase requisition, inspects, counts and sends the packing slip to accounts payable, updates inventory subsidiary ledger and sends an account summary to Vic in the general ledger department. The company lacks segregation of duties in purchases system. Potential consequences if duties are not separated are unauthorized or unnecessary purchases made, improper charges made to department budgets, excessive costs incurred and goods purchased for personal use. Criteria: (Established Procedures/Best Practices)
To ensure proper separation of duties, assign related
buying functions to different people. With proper segregation, no single person has complete control over all buying activities. Best practice is to have different people: Approve purchases Receive ordered materials Approve invoices for payment Review and reconcile financial records Perform inventory counts Others best practices in buying functions: Comply with ethical buying practices and policy. Review and update signature authorizations. Obtain pre-approval of consultant agreements by Purchasing. Verify receipt of goods and services against contract/ purchase order and invoice information. Reconcile ledgers for accuracy of recorded transactions. Recommendations: (Proposed Solution)
GMCR should create departments that would handle
the operations. Since they are a manufacturing company, the production planning and control department recognizes and authorizes the ordering of materials needed for production. Purchasing department should prepare the purchase order and sends copies to Inventory Control, Accounts Payable, Receiving and the vendor. The receiving department has the responsibility to decide whether to accept the delivery and verify quantity and quality of the goods delivered. Accounts Payable Department approves vendor invoices for payment. The accounts payable department compares the invoice, the purchase requisition, the purchase order, and the receiving report to understand the economic transactions. General Ledger Department reconciles the summary journal voucher from accounts payable and the summary journal from inventory control. The last is department is Cash Disbursements Department prepares the payment and records them. Their system must be designed so that it would take more than one employee to successfully carry out a fraudulent act. Comments and Concerns: (Condition, Cause & Effect)
Fayth handles the major functions in the cash
disbursement cycle of GMCR. She has a sole control over the transactions from payment to recording while Vic has a limited role in the general ledger department. There is lack of segregation of duties in its cash disbursement system. In this case, there are irregularities that may happen such as paying for goods not received, paying the same invoice twice, recording and posting errors in accounts payable, misappropriating cash or checks, failing to catch errors in vendor invoices and other fraudulent activities. Criteria: (Established Procedures/Best Practices)
Segregation of duties means that no financial
transaction is handled by only one person from beginning to end. For cash disbursements, this might mean that different people authorize payments, sign checks, record payments in the books, and reconcile the bank statements. The person who signs the checks and mails them to the supplier must be separated from record keeping for the assets by the accounting department specifically accounts payable and general ledger. In an ideal system, different employees would perform each of these four major functions. In other words, no person should have control of two or more of these responsibilities. The more negotiable the asset, the greater the need for proper segregation of duties, especially when dealing with cash, negotiable checks and inventories. Recommendations: (Proposed Solution)
Aside from Fayth who is assigned in
accounts payable, GMCR should assign other employee to handle invoicing because it should be separated from AP function to avoid processing transactions at the wrong price/term or payments made for items not received, overpayment of goods and theft of cash. Another employee should be assigned on Disbursement function because it should be segregated from the AP function to avoid unauthorized checks supported by fictitious documents that may be issued and unauthorized transactions will be recorded. Comments and Concerns: (Condition, Cause & Effect)
GMCRs transaction records are mostly in the form
of hard copy. Every employee maintains its own record that can easily be accessed. Aside from individual record keeping, they dont have a centralized record keeping handled by a single person or a computer system. Loosing important documents and alteration or unauthorized disclosure of data might happen. Criteria: (Established Procedures/Best Practices)
Access to records must be limited to proper
safeguarding. Indirect access to assets of the company can be achieved by gaining access to records and documents that control the use, ownership, and disposition of the asset. Companies can control the use of documents and records by segregating the duties of those who must access and process records. Records must be protected and backed up. Safeguarding of records is possible through the use of computer with security access. Processing capabilities and storage capacity of computers have made electronic storage and retrieval of information a common practice in business. Computer-generated document management, records management software, and imaging systems assist businesses with large volumes of records. Imaging systems convert all types of documents to digitized electronic data that can be stored and retrieved quickly. With the advent of super high-density magnetic storage and online storage, this will be much less of an issue in the future. Recommendations: (Proposed Solution)
GMCR should create a computer-generated record
management for updated recording and assign an employee to handle the record keeping preventing unauthorized access. Through computer system recording, transactions through hard copy will be minimized and retrieval of information will be easier. Individual records of employees in purchases system and cash disbursements systems must be protected using file labels, back-up and disaster recovery plans and access controls.