Part a
An imperative strategy in any type of business is to make it easy for the customers to acquire the services or buy the goods. This specifically applies in situations where the customers apply or place orders for the services and goods in advance or that are not immediately available. Therefore, Winford services plc have a mandate to make it easy for West River Borough customers to acquire leisure services. In addition, in its accounting activities, it must conform to all the regulatory financial reporting requirements. The accounting activities that Winford Services plc will be undertaking are important because they will record all the information for both economic and business activities undertaken in the provision of leisure activities.
The sales process in everyday operations of Winford services plc will involve taking the customers’ orders, confirming what the customers will have ordered, fulfilling order as well as dispatching them, and finally recording dispatch that is generating the sales invoice. Taking the orders from customers will not be an easy task. Therefore, it will be important for Winford to know in advance, what it will be doing since taking the orders from customers can be a very time consuming process. This process will be the critical part of growing the leisure services provision services business.
It will be important for Winford to help West River Borough customers by removing the time constraints as well as hassles of order taking. Thus, it will be important for Winford Services to make this process smother as well as less stressful procedure for the entire customers. To make this process become successful, Winford should establish a dedicated order line for all the customers and develop a unique sales process, which will fit its requirements.
In confirming the orders, Winford needs to give the customers the confidence that their orders will be processed as expected. It is important for Winford to use written confirmations in confirming the customers’ orders, as this will build into its documentation process. Confirming orders completion will be a worthwhile process, as it will allow Winford to finalize its records and show the customers that they care about them, which will help to build their trust.
In the process of fulfilling the orders and dispatching them, Winford will need to prepare dispatch notes. It will be important for Winford to keep faith with the customers by ensuring that it will meet the deadlines it will have set with them, since this will enhance the reputation of the business. In case there will be expected delays in the provision of leisure services, it is important for it to notify the customers in advance so that they will be clear about the problems as well as when they will expect rescheduled service provisions.
The other process, which must put be in place in new swimming pool sales system, will involve recording dispatch that is, generating the sales invoices. Sales invoices will be important in the swimming pool sales system because they will help Winford Services plc to communicate to the customers about sums, which will be due in the exchange of services that will have been provided. These sales invoices will include sales of season tickets, single visit tickets, and vending machine sales that will comprise the sales of snacks and drinks.
The sales invoices will include information about the services ordered by the customers whether single day or seasonal, drinks and snacks ordered by the customers in the swimming pool, discounts individuals aged under 18 and over 60 will receive, and total amount they will have owed. Additionally, these sales invoices will contain brief summaries of transaction terms. As sales invoices will represent the revenue earned, Winford services plc will need to use accrual accounting method to enter the sales invoices in revenue section of its ledger. This will help to show the total business earnings.
In addition, Winford Services plc will need to use the sales invoices to prepare the accounts receivable for the payments that it will not have received from the customers. This is crucial in Winford’s day-to-day operations, as it will provide the information about if the cash flow shortfalls will stem from customers who will be slow in paying or low sales volume. The sales invoices will also be important in creating the billing systems. Furthermore, the sales invoices Winford Services plc will have created will be fundamental in budgeting, as they will provide the information about the amount expected revenue in periods to come.
Additionally, Winford Services plc will need to prepare receipts and reports. Among these receipts will include customers’ statement that it will send to the customers periodically, remittance advices that will result from receipt of cash with the remittance advice, and data storage that is, transaction entry and storage, which will be done in all the stages of new swimming pool sales system. The reports that the company needs to prepare include bad debt reporting, cash receipts forecast, customer listings, aged receivable reports, sales transaction reports, and sales analysis reports. To succeed in providing the swimming pool services, Winford Services plc needs to make sure, that it will build a good business image and its accounting activities should be appropriate and conform to the accounting regulations.
Part b
The new sales system is subjected to numerous principles risks that include errors, fraud, or theft. Therefore, Winford Services management should prioritize on how to put in place appropriate processes to manage, monitor, and lastly mitigate these risks. Effective principle risks management should be the central to the internal control system of Winford Services plc.
In everyday operations of Winford Services plc, errors might occur that is, it is possible for non-fraudulent discrepancies to occur in its financial documentation. In the new sales system, errors of omission might occur. These errors can be hard to detect, as they involve accountants failure to record any transaction either completely or partially. The reason why these errors might be difficult to detect is that they lead to a balanced equation. Therefore, it is important for Winford’s accountants as well as internal control system to double-check their accounting reporting appropriately to determine if any information was omitted.
The other types of errors that are likely to occur are the errors of commission. The accountants might record incorrect values in the posting. In the new sales system, these errors might include calculation errors, transposition errors, original entry errors, and reversal of entries. In terms of original errors, the accountants might record and post incorrect figures. Regarding the calculation errors, they may use incorrect totals. Transposition errors might occur in the new sales system if the accountants will switch two digits in a certain number. In terms of reversal of entries, the accountants might use correct figures, which were entered on wrong side of respective accounts in correct accounts.
The new sales system might also experience the errors of principle. Winford’s accountants might include transactions that are not in accordance with the generally accepted accounting principles (GAAP) for instance, they might place expenditures in unsuitable categories. The accountants should use a series of the standard accounting practices, as their lack of use might lead to discrepancies on the financial statements. To address the principal risks of errors effectively, the internal control system should follow the accounting standards like GAAP as well as maintain appropriate internal controls.
In terms of the principal risk of theft or fraud, the employees, individuals in governance and management, or third parties might intentionally use deception to obtain an illegal or unjust advantage. These people might involve themselves in the manipulation of computer data or the computer to obtain cash, services, property, or cause a loss in the new sales system. The categories of fraud that Winford’s employees or third parties might involve themselves include producing fraudulent financial statements, corruption, and asset misappropriation. They may engage in these activities due to various motivations that among them include envy of success and wealth, corrupt corporate cultures, moral justification, competitive ethnic of capitalism among others. Winford’s internal control system thus has an obligation of preventing fraudulent activities in the new sales system through ensuring that there have independent checks/audits, and that they are not overridden by the management.
Winford’s management should ensure that it has an effective internal control system possessing some salient features, which will help it in addressing the risks discussed above. One of the characteristic that Winford’s internal control system should have is ability to assign responsibilities to its specific individuals, which will help to minimize the risks. The internal control system should also be capable to segregate duties among various individuals. In addition, the internal control system should have physical controls for safeguarding the assets, and electronic and mechanical controls for also safeguarding the assets as well as enhancing the reliability and accuracy of all the accounting records. This control system should also have the necessary independence to internally review, compare, and make reconciliation of the data prepared by the employees. All these features will help in addressing the examined risks associated with new sales system.
Part c
Winford’s external auditors are also subjected to similar code of ethics as well as the professional code of conduct as appropriate to the internal auditors. For this reason, they will be required to conform to the auditing regulations. For instance, if they are going to detect fraud in Winford’s accounting reporting, it is their responsibility to bring such fraud to the attention of the managers and consider withdrawing from engaging with the institution given that the management fails to take the appropriate actions.
With regard to the internal controls of new sales system, Winford’s external auditors will investigate the competency of all the Winford’s internal auditors. When assessing their competence, the external auditors should get the internal auditor’s information from the previous years about various factors. One of these factors is the professional experience as well as the educational level of all Winford’s internal auditors. This is important since it will help them to determine whether they have the capability to produce competent internal audits.
The external auditors also need to obtain information about internal auditors’ performance. Professional certification as well as continuing education of the internal auditors is the other important factor that Winford’s external auditors will obtain information about. All this information will help these external auditors to determine the competency of the Winford’s internal auditors and eventually quality of internal controls of new sales system.
Besides auditing the competency of the internal auditors, Winford’s external auditors need to undertake the auditing programs, policies, and procedures used in the internal controls of new sale system. These external auditors will also review the practices regarding the assignments of Winford’s internal auditors. This will involve double-checking the work of Winford’s internal auditors and train them in accounting principles through explaining how their examination of accounting information differs from examination by the internal auditors. This will help in improving the quality of internal audit undertaken within Winford services plc.
With regard to the substantive testing of the sales, Winford’s external auditors will detect material fraud or misstatement at assertion level. These external auditors will physically examine the inventory as indication that the inventory shown in accounting records really exists that is, existence assertion. They will then inspect the supporting documents such as different sales invoices to confirm that the sales did occur that is, the assertion of occurrence. Winford’s external auditors will arrange for the supplies to check in writing details of amount owing at the balance date as an indication that the accounts payable is actually a liability that is, the assertion of rights and obligations. Then, they will investigations of the management about customer’s accounts collectibility as an indication that the trade debtors are correct as to its assessment.
