in May $12$

learningspace.myucw.ca

Best Resting Experience Ltd$.($BRE$)$ is a medium$-$sized retail furniture business with eight large stores located in British Columbia. It specializes in selling living room sofas, sleeper sofas, L$-$shaped sofas, sofa tables, and home d$$cor sofa side items.

As the business has gradually grown over the years, each store currently maintains its own systems for controlling and selecting suppliers, managing purchase orders, handling goods received, processing returns, issuing credit notes, and managing supplier payments. Recently, Rose, the controller of BRE, has received information from whistleblowers, revealing the following concerns:

In one store, the high volume of unauthorized purchases has resulted in overstocking and the misuse of inventories. Additionally, this store sometimes procures goods from suppliers with non$-$competitive payment terms and prices.

In another store, there have been instances of payments made for furniture purchased from suppliers that has not been received.

The year$-$end reconciliation indicates a significant difference between inventory records and stock levels across branches.

To address these concerns, Rose is trying to implement appropriate processes and internal controls. She plans to centralize the purchase system and general ledger at the head office. Although individual stores will continue to receive goods directly, all accounting and payment administration will be managed by a purchase administrator based at head office.

Rose has requested your assistance as a consultant to draft a business memo assessing the risks associated with key elements of the purchase, payables, and payment system in BRE. Furthermore, she wants you to outline the principal internal control procedures expected to be put in place. She is particularly interested in whether her proposed changes to administration of operations align with the company's objectives.

Please provide your insights and recommendations in a four$-$to$-$five paragraph memo to Rose, addressing the identified concerns and proposing solutions to enhance internal controls and overall operational efficiency. Please tie your response to the learning we have done in class during this week. In your memo, you may make comparisons between the control environment and risk factors