Internal Control Report
Walmart Stores, which is operating as a retail business, has been trying to turn around its decreasing profits through breaking down its existing clients and as a result, it has brand aspirational customers. They fall into low-income groups but are obsessed with brand names such as KitchenAid. Other customers are wealthier shoppers that are satisfied by the company deals and the volume price shoppers that like low prices. That is they cannot afford much more prices. However, Walmart offers the following products (Corporate.walmart.com):
Beauty products
Electronics
Automotive products
Sporting products
Garden items
Pet suppliers
Housewares
Furniture
The internal control system is an integral part of business policies of any organization (Weygandt, Kimmel, and Kieso: 340). Therefore, it consists of measures that an organization should take purposely to offer protection to its resources, inefficiency, and fraud. This will ensure accuracy and reliability on the operating data. Moreover, proper internal control will evaluate the performance level of all units of the company. Therefore, internal controls are important for the company practices. Regarding internal control systems, Walmart has the following control procedures:
Assigning Responsibilities
For the internal control systems to effective in Walmart, the retail store has properly assigned clear responsibilities for the implantation of the controls for the employees to respect and adhere to them. For instance, the management of various branches of the stores is responsible for the implementation of the control procedures. Similarly, they monitor the policies and procedures that are related to internal control at branch levels. While assigning the responsibility to the employees, Walmart complies adequate information and ensures that it reaches the relevant departmental management for timely decision making in Walmart.
Segregation of duties
Separation of duties has reduced the likelihood some errors and irregularities in Walmart stores. Therefore, an individual employee in Walmart has no responsibility for more than one of the components in the transaction like custody, authorization, and record keeping. While checking the work of an individual worker, it was done by another employee. Similarly, the duty of the custody of the assets is different from the responsibility of record maintenance associated with the assets in Walmart. This indicates that Walmart has proper separation of duties, and this helps the company to detect errors in time while deterring improper business activities. At the same time, Walmart has devised a proper operational efficiencies for effective and proper communications.
Documentation
Walmart stores have proper retention of its records, and this has provided a reasonable assurance concerning all information and the company's transactions of value since they have been recorded and properly retained. Similarly, the company has controlled the records according to the established period for retention and dispose of the records as per the established procedures.
Monitoring
Walmart has provided for a proper assessment of the quality of its internal control systems in terms of its performance over time. The company has been monitoring its daily operations like on its daily management and supervisory duties. Moreover, it is monitoring the actions of the employees that they take while performing their duties. This is to verify if the internal control systems are operating properly. The retail store also confirms, and reconcile the reports to limit the occurrence of errors.
Authorization
The company reviews the supporting information to provide a verification of its propriety and the validity of the company's transactions. Similarly, the approval authority should commensurate with nature and the importance of the transactions that comply with the policy of Walmart Stores.
Limitations
Despite the strong internal control systems in Walmart, the large number of employees in the company has obstructed the efforts of segregating their duties properly. The company also faces a problem of limited inherent in its control systems, and this is due to human error, fatigue, misunderstanding, and stress.
Walmart incurs a lot of cost in implementing their internal control systems, and this exceeds the expected benefit of the control systems. Moreover, the retail store lacks the costs out of pocket to establish proper internal controls.
The main objective of the internal control system is risk reduction that is associated with errors and irregularities that were not detected in the organization. However, it was a challenge to Walmart in designing and establishing effective controls. This is because internal controls cannot be achieved within a short time.
Recommendations
When implementing internal control measures within the operation systems, small businesses such as microfinance institutions should do a proper and regular checks on the effectiveness of these control systems. The small businesses should also factor in the initial cost of implementing the control systems, and since the initial costs are high, the small businesses should limit the initial cost of implementing the internal control systems. Therefore, it will be the duty of their managers to provide an oversight role to the employees and to monitor whether the employees adhere to the policy of the company. However, an effective internal control system should include a systematic review of the business operations or the internal control audit.
Bibliography
Corporate.walmart.com. "Our Retail Divisions". N.p., 2016. Web. 25 Feb. 2016.
Weygandt, Jerry, Paul Kimmel, and Donald Kieso. Financial Accounting. 7th ed. John Wiley & Sons, 2009. Print.
