Question
Healthy and Prosperous Co is a traditional family-oriented health food business industry. operating in the field for more than 40 years, by Ron and
Healthy and Prosperous Co is a traditional family-oriented health food business industry. operating in the field for more than 40 years, by Ron and Potter. Their mission and goal have always been passionate in producing healthy food and are more concerned about the quality of food they sell than the financial details of their business. Potter have never been too concerned with the financial performance if they can provide good service to their customers, make enough to keep the business going and provide continued employment for themselves and their workers. During their internal year end performance review on 31 December 2021, they discovered that whilst food sales continued to be profitable, but the operating margin and net inflows in the company declined as compared to past years of operation. Upon internal investigations, several events were discovered, which they think may have caused the problem for the declining financials. 1. There was no adequate control to ensure revenue transactions are recorded on a timely basis, as there is shortage of sales staff to handle the end-to-end process, from accepting sales orders, till collection of monies. The sales orders and supporting documents are manually stored in files, without any references on the total number of sales recorded. 2. In terms of purchases, there were no authorization prior to placing purchases to suppliers. Purchasing department decides on supplier and places orders according to the needs. 3. Monthly payroll calculations are independently handled by Human Resource Manager, who calculates employees' salaries and wages, and makes bank transfers at end of month. 4. In Store department, inventories physical records are not maintained, hence the physical quantity of inventories could not be matched to the financial records. Also, the inventory cost price is not recorded and maintained by store manager. All these matters were highlighted to auditors at initial discussion meeting. The Company realizes the importance of having strong controls over operations and financial reports, to sustain the business in future.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started