Case Study: CBU
Matthew 24:42-44 “So you, too, must keep watch! For you don’t know what day your Lord is coming.”
Inventory plays a vital role in the success of a business and can have a major impact on the financial statements. When owning a business, it is imperative that your inventory is recorded correctly. If your inventory is incorrect at the end of the year, it can affect different areas of a business and its profitability. Focusing on getting the inventory correct should be one of a business owners top priorities. (Luke Arthur, n.d.)When it comes to keeping track of inventory, companies have two methods to choose from; the periodic and perpetual inventory systems. According to Investopedia, a periodic inventory system is a method
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I think the failure of this system tainted Accountant B’s view on the audit in which she blamed her colleagues for not developing more timely and effective system controls. When dealing with computers and software, operators can input the correct data but somehow still find errors in their work due to glitches. This is why I have to disagree with Accountant B’s philosophy. In my opinion, CBU had to revert to the periodic inventory system in order to avoid being penalized. “If a corporation overstates its inventory, it will also be overstating its gross profit and net income as well as its current assets, total assets, retained earnings, stockholders' equity, and all of the related financial ratios.” (AccountingCoach, n.d.). I really admire Accountant A’s enthusiasm. It shows that Accountant A has a strong support of the periodic accounting system because it allowed his staff to utilize their skill set. By exercising a good system of internal control, and having a regular physical inventory count the auditors saved CBU by not allowing them to end up like Stein Mart. Stein Mart was penalized for overstating it’s inventory's value and had to pay a fine of $800,000 to the Securities and Exchange
Auditors will assess the accuracy of inventory count and movement procedures. Auditors will also discuss any analytical procedures performed that are linked to inventory and talk about it with management about any substantial changes or strange developments in inventories.
The accounting system misallocated motors from the asset manufacturing equipment to inventory. There are issues of honesty, responsibility, and professional ethics.
Before inventory productivity can be improved, one must take a careful and critical look at the specific business entity, which in this case is Austin Wood Products. In the case it stated that there is no way to know what is available in the storage room until you get there is a huge concern. There is usually a 50 percent chance of obtaining the needed lumber for a job, and this is interfering with productivity. In the area of inventory management, the purchasing professional should make explicit decisions. There are many things that the company must be aware of. Some things you must take into consideration are what to stock, how must to invest, and how much service to offer. In regards to what to stock, the purchasing professional, at the very minimum, must meet the requirements and needs of the manufacturer or distribution operation. Austin Wood Products failed to have any formal stock management technique in effect to take care of raw materials & done merchandise. The stock count is finished by hand & takes days. They weren't maintaining any stock record at all. The significance of demand conjointly was tough to foretell because it varied from year to successive. The metric was that the stock turnover that relates stock levels to the merchandise sales volume was turned numerous times every quarter. Austin Wood Products doesn't place a significant stress on maintaining correct inventory records. So, implementing an inventory control system can modernize the system. Once they develop and implement this inventory control system, inventory records are going to be upheld truthfully and that they will get the accurate standing of the inventory up-to-date. In order to maintain the steady continuous supply for production need...
The ethical discernment model described by Slosar (2004) and developed for use at Ascension Health will assist us as we analyze this case. It reminds us that discernment engages our spirituality, intellect, imagination, intuition, and beliefs. It is decision-making that reaches into the heart of our beliefs about God, creation, others, and ourselves. It therefore requires structured time for reflection and prayer from the beginning and throughout the process.
It is obvious that the Auditors cannot check all the inventories in every store. However, The extent of the negligence was too extreme. Moreover, There are factors contributed to the fraud. Phar-Mor hired a member of the external audit team and gets information on which store is going to be audited, that affects the independency of the existing external auditors. Sarbanes-Oxley Act of 2002 states “It shall be unlawful for a registered public accounting firm to perform for an issuer any audit service required by this title, if a chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for the issuer, was employed by that registered independent public accounting firm and participated in any capacity in the audit of that issuer during the 1-year period preceding the date of the initiation of the audit.’’ (Sarbanes-Oxley Act of 2002,section 206). In addition, SEC prohibits the role of such individuals in financial
When returning inventory to suppliers, returns could be overstated or recorded in an earlier period. When the inventory is being sold it may be recorded at too low of an amount, cost of goods may not be recorded at all and inventory may not be reduced accordingly. Items could become obsolete and instead of writing it down/off the employees may just take it. It didn’t mention whether Lakeside performs valid, internal periodic counts. If they lack this internal control this could allow employees to steal inventory. The employees could hide this inventory shrinkage by double counting inventory. A company could also falsify purchase orders, shipping reports and even label boxes as inventory when they are actually empty. Furthermore, understating ending inventory would reduce taxes as it reduces the company’s
the retail industry is highly competitive which means a product could pass from highly seek to a “dust collector” in a matter of a few months. This makes valuating inventory very hard. Deloitte asserted this statement by strictly defining what was to be considered obsolete inventory and setting a wide amount range for what was to be considered obsolete. However, Just for Feet’s estimate was around 63% lower than Deloitte’s lower range. Deloitte did not thoroughly check such a discrepancy even after noticing category #3 for obsolete items was totally ignored a WHOLE warehouse was omitted from inventory count.
Currently, the Steamboat Springs campus is not doing a very productive job at encouraging appropriate sustainability thoughts or behavior concerning the Real Food Challenge. The prevailing system in place promotes students and staff not questioning what Sodexo has given to us when it comes to dining hall and cafe options by setting low standards and maintaining them. This is enabled by the lack of architecture, signage or other communication channels that would encourage and motivate the CMC community to make the shift regarding real food options.
UBS has its roots as a Swiss Bank, originating in 1862, when its first major branch, Bank in Winterthur, was established. However, the three core components of the company date back to the second half of the nineteenth century. Union Bank of Switzerland, Swiss Bank Corporation, and Paine Webber or their predecessors were all founded in the 1860s and 1870s. Modern UBS was formed through a merger of the Union Bank of Switzerland and the Swiss Bank Corporation in June 1998.
Unfortunately, we have witnessed throughout history businesses skewing accounting records to benefit themselves. There are many small, somewhat unnoticeable changes that a company can make towards their books that potentially will benefit them in any way they wish. Sometimes, these changes are just mistakes like the German based company, Hypo Real Estate in 2011 (Buergin). Other instances have included infamous companies like Enron, Worldcom, and Tyco, in which they all knowingly changed miscellaneous accounts on the books for their own company’s benefit.
... inventory turnover was found to be very low. The low inventory turnover ratio was an indicator of inadequacy, since inventory usually has a rate of return of zero (Inventory Turnover Ratio Interpretation, 2009). It also implied either poor sales or excess inventory. A low turnover rate indicated poor liquidity, convincible overstocking, and obsolescence, but it would have also reflected a planned inventory build-up in the case of material shortages or in anticipation of rapidly rising prices. (Inventory Turnover Ratio Interpretation, 2009) And a rapid and unexplained rise in the number of sales per day in receivables in addition to growing inventories to cover the shortage was noted. The interviewee (Public Accountant) could smell something suspicious which led him for more detailed procedures and proactive investigation at the end of which a fraud was detected.
Inventory management is a method through which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle of the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seen more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company; effective and efficient inventory management is of critical importance.
Inventory management can enhance the efficiency in operation of the supermarket. Supermarket must ensure that the correct levels of inventory are being maintained throughout the store, and that merchandise is purchased at the best price point as possible. Holding too much inventory on hand generate costs like carrying costs. Whereas having too little inventory on hand makes customers dissatisfied and it leads to declining
Inventory management is defined because a science mostly established art of guaranteeing that just enough inventory share is command with a company to fulfill demand (Coleman, 2000; Jay & Barry, 2006). it's mostly regarding specifying the size and keeping of stacked product. Inventory management is usually needed at completely distinct spots within a service or within multiple spots of a supply network to guard the standard and planned course of production up against the random disruption of running low upon materials or product. The scope of inventory administration also concerns the good lines between replenishment period interval, carrying costs of inventory, asset management, investment forecasting, inventory valuation, selection visibility,
Inventory can be explained as any assets that are held for future use or sale. Inventories are held for a variety of reasons, such as customer demand for end items, smoothing production, a hedge against stock outs and price increases, and economical purchasing. It is very costly and wasteful to keep large inventory on hand. The new technology and application quantitative tools and techniques for inventory management have permitted decrease in inventory. Top management needs to understand the role that inventories have on a company’s financial performance, operational efficiency, and customer satisfaction and strike the proper balance in meeting strategic objectives. They are responsible in keeping sufficient inventories to meet demand of the customers by sustaining the lower cost as possible. Inventories are required for a business to operate efficiently and effectively. Inventory management is a very significant part of basic operations activities. Most businesses and general organizations obtain most of their revenue through the sale of inventory.