The inadequacy of agency theory and labour - MyAssignmenthelp.com

Question: Discuss aboutThe inadequacy of agency theory and labor. Answer: Introduction Bucks Phyz is a company that has a medium size and obtains an annual turnover of $2.5 million. The particular issue that has been highlighted in the question is that the accountant of the company has been asked to review the sales process of the company on the basis of the key information that has been derived from the staff interviews. As mentioned in the case study the company has gone through a restructuring program within the sales team which hugely impacted the operating environment of the company. It has been further mentioned in the case study that the change in the key personnel might have affected business. Bucks Phyz also has been going through fraudulent behavior in the accounts department. Therefore, the present circumstances of the company are such that it cannot afford to incur any kind of revenue leakage. Thus, the internal control that is needed to be implemented within business has been evaluated in this particular study. Moreover, the decision of the introduction of the corporate credit cards has been analyzed. This study aims to provide an understanding of the internal controls that are an essential part of corporate governance and the how these controls effectively enhance the successful carrying out of the business operations. Overview of the sales process The particular sales process that has been adopted by business revolves around the new pricing tool that is utilized by the sales managers for the accurate calculation of the prices of the offers that are sent out. The particular fact that should be noted here is that the authorization in regards to the sales process is not adhered to, strictly by the managers. The Head of Sales, Barry has evidently stated in his interview that tough there is a standardized process in relation to the authorization policy, it has still not been mapped. The other issue associated with the sales process is that the standard contract template is not of desired quality. Lastly, the credit check process that involves the checking of the credit worthiness of a particular customer appears to be error free. The credit worthiness of a customer is checked from the agency website and the credit is granted to the customer if the rating is anything other than C. If the rating is C then a different payment method h as to be negotiated. Internal control issues in Buck Phyz sales process The effective reviewing of the sales process has led to identification of the following weaknesses in the business operation of the firm. Sales Process Internal control weakness Impact Recommendation Data entry The new customer data that is entered into the pricing template is not reviewed effectively as this according to the management would be irrational and would affect the cost benefit ratio (Mihret, 2014). The impact that such a internal control weakness could have is that the data related to customer might be wrongly entered into the system which could lead to potential loss of customer or may tantamount to breach of customer data security (William, Glover Prawitt, 2016). Segregation of duty in regards to the responsibility of reviewing the data that is entered into the pricing template would be beneficial for business. the particular recommendation that is applicable in such a situation is appointment of an employee in reviewing the pricing template data New Pricing tool The new pricing tool that has been incorporated in business needs the managers to be effectively trained for the optimal utilization of the tool (Mihret, 2014). The lack of effective training might lead to the wrong calculation of the offer prices which may affect business in a negative way (Li, 2015). Proper training in the utilization of the new pricing tool should be provided Authorization Policy The standardized process that is set up by the management in regards to the sales authorization policy is not strictly followed by any manager. This fact is known by the Head of Sales and is effectively supported as according to his opinion the existence of certain issues and constraints might restrict the adherence to the standardized process. (Boyle, 2015) The fact that the non compliance to the standardized process to the authorization policy is permitted by the managers, broaden the scope of fraudulent activities by the managers. The managers may send offers to the customers at prices that are much greater than the real value of the offer (DeFond Lennox, 2017) The standardized process that has been established by the management should be modified and the strict adherence to such a process should be mandated in order to avoid the occurrence of fraudulent activities Credit Check Process The particular credit check process incorporated and utilized by the company appears to be without error. However, the particular issue that is reported by Lucinda is that there have been several instances in which the credit checks had been performed on new customers after the sales contract was signed by the both the parties and that the invoices had been issued. Therefore, the lack of strict adherence to the credit check process may lead to the granting of credit to the unworthy customers that may lead to a potential loss (Mitra, Song, Yang, 2015). The impact that the lack of adherence to the credit check process may have is that it may lead to a huge loss incurred by the company as the credit may be granted to a party who is unable to repay it (Abernathy 2015). The evaluation of a particular customer in terms of credit worthiness should be mandatorily executed. The system should be such designed that omitting to check the credit worthiness of the customer would not permit a manager to go forward with the particular deal. Introduction of corporate credit cards The introduction of the corporate credit cards may turn out to be hugely profitable for business stated that the transactions for the purchase of services or products that are processed via the credit cards are applicable and really necessary for business. The introduction of the corporate credit cards broadens the risk scope of business by leaps and bounds. However, the numerous advantages that are enjoyed by business due to the providence of the corporate credit cards cover up for the potential risks faced by the business. The introduction of the corporate credit cards will effectively reduce the hassles that are related to the transfer of payments by the company to the suppliers account. Furthermore, the introduction of the corporate credit cards will also hugely simplify the process of reimbursement thus, reducing the cost of operations (Knechel Salterio, 2016). The particular internal control that should be implemented by the management of BucksPhyz in order to minimize the impact of the risks related with the introduction of the corporate credit cards is that a particular team should be formed in order to monitor the transactions that are conducted via the corporate credit cards. The finance department staff should be selected in order to form the group for the purpose of authorizing the transactions that are incurred with the corporate credit cards so that no fraudulent activities are carried out (Wu Tuttle, 2014). The particular recommendation to the CEO of the company would be that the issuance of the corporate credit cards should only be restricted to the key personnel, who are involved with the core processes of business. For instance, the situation that has been mentioned in the booking of the training course could be paid for, by the corporate credit cards that would have been allotted to the core human resource personnel after proper authorization by the finance team (Abbott, 2016). References Abbott, L. J., Daugherty, B., Parker, S., Peters, G. F. (2016). Internal audit quality and financial reporting quality: The joint importance of independence and competence. Journal of Accounting Research, 54(1), 3-40. Abernathy, J., Hackenbrack, K. E., Joe, J. R., Pevzner, M., Wu, Y. J. (2015). Comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Staff Consultation Paper, Auditing Accounting Estimates and Fair Value Measurements: Participating Committee Members. Current Issues in Auditing, 9(1), C1-C11. Boyle, J. F., Gramling, A. A., Hermanson, D. R., Hermanson, H. M. (2015). 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