It is October 2013 and you have just been employed as the accounting technician for A to Z Vehicle Hire and will be based at their head office in Northfield. As one of your first tasks, the partners have asked you to review the accounting systems at A to Z Vehicle Hire, and particularly the effectiveness of its internal controls.

You have also been tasked with reviewing whether the culture of the organisation could be improved, both in terms of working ethically and in terms of social, corporate and environmental sustainability.

Finally, you are asked to make any recommendations for improvements which you identify as being necessary. (The partners know there are many weaknesses, but are uncertain as to how these should be managed.) The detailed task requirements are set out on pages 4 and 5.

I have attached the necessary information for it.

Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Internal Control and Accounting Systems (AQ2013) For use in the AAT Accounting Qualification A to Z Vehicle hire Assessment book Time allowed: Four months AAT Level 4 Diploma in Accounting Internal Control and Accounting Systems QCF qual ref SCQF qual ref QCF unit ref SCQF unit ref 600/6892/9 R324 04 F/504/3353 UD65 04 Notice to candidates 1) All candidates must adhere to the terms and conditions specified for this assessment. 2) Your report must be typed, completed and submitted for formal assessment within four months. Your assessment start date was recorded onto the assessment platform when you accepted the terms and conditions in order to access this assessment. 3) You will have four more opportunities to submit further supporting evidence at the discretion of your assessor. Please discuss this with your assessor. 4) Only your final submission should be made through the assessment platform. 5) Instances of misconduct will be investigated by AAT and appropriate action will be taken. 6) If you believe you have witnessed malpractice on the part of another candidate then you are encouraged to report this, in confidence, to an invigilator who will investigate and report to AAT. Copyright of AAT assessments and materials: AAT assessment material is copyright protected. You are not permitted to copy, distribute, download, modify, reuse, reproduce, repost, retransmit, disseminate, publish, broadcast, circulate, sell or otherwise use AAT assessment material. Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Guidance The unit being assessed by this report is Internal Control and Accounting Systems. The report should be mapped to the learning outcomes and assessment criteria by paragraph number to ensure all criteria are covered. Assessment is by a formal business report, which can be reviewed by your assessor up to a maximum of five times. If not competent at that stage it will be necessary for you to complete a new report based upon a different case study. General guidance is available on both report writing and content on the AAT website. To write the report you will need to ensure you cover the six learning outcomes, and ALL the supporting assessment criteria. 2 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Assessment Tasks It is October 2013 and you have just been employed as the accounting technician for A to Z Vehicle Hire and will be based at their head office in Northfield. As one of your first tasks, the partners have asked you to review the accounting systems at A to Z Vehicle Hire, and particularly the effectiveness of its internal controls. You have also been tasked with reviewing whether the culture of the organisation could be improved, both in terms of working ethically and in terms of social, corporate and environmental sustainability. Finally, you are asked to make any recommendations for improvements which you identify as being necessary. (The partners know there are many weaknesses, but are uncertain as to how these should be managed.) The detailed task requirements are set out on pages 4 and 5. The partners have also suggested you review the following documents, which are available online and in the appendices of this assessment book: AAT Code of Professional Ethics http://www.aat.org.uk/sites/default/files/assets/AAT_Code_of_Professional_Ethics.pdf 'Renting a Car' - Appendix 1, p.20 Original source: http://wikitravel.org/en/Renting_a_car 'Creating a partnership agreement' - Appendix 2, p.30 Original source: http://www.startups.co.uk/creating-a-partnership-agreement.html Note: Where the pages listed above are not hosted by AAT, the relevant information is reproduced in full in the appendices of this assessment book. To help you in this they have asked the accounts staff to prepare some brief information about themselves, an overview of the accounting system, and also a list of events that have occurred over the previous few months since the partnership was formed. This information can be found in the firm's diary. You are required to produce a business report addressed to Alan Milnes, Senior Partner. The report should be approximately 4000-5000 words long but please note that the word count is not critical; what is important is the quality of the writing. For more information see the guidance page or review the guidance on the AAT website. Task 1) Review and evaluate the accounting system. Task 2) Conduct an ethical evaluation of the accounting systems. Task 3) Conduct a sustainability evaluation of the accounting systems. Task 4) Identify weaknesses and make recommendations for improvement. 3 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Task 1) Review and evaluate the accounting system This review can be of the complete system or of one or more of the accounting functions - depending on your findings - but must specifically cover the following points: Record keeping systems - explain the purpose of financial reports and the suitability of the organisation's current reports to meet organisational needs Internal systems of control - identify how internal control supports the accounting system and the types of internal control in place and any controls that are missing Fraud - explain the causes of fraud, common types of fraud, methods that can be used to detect fraud and potential areas for fraud within the organisation Working methods/practices - review the working methods used including the use of appropriate computer software and the operating methods in terms of reliability, speed and cost effectiveness Training -identify how training is or can be used to support staff. The review should cover all aspects of the assessment criteria, as mapped above, when they can naturally be introduced into the report. If the criteria cannot be covered in the report then they should be covered in a written explanation included in the appendix. Whilst a SWOT analysis may be a good starting place, this should not be placed in the body of the report. Task 2) Conduct an ethical evaluation of the accounting systems. Evaluate the accounting systems against ethical principles by reviewing working practices. Identify any actual or possible breaches of professional ethics. To help you with this see http://www.aat.org.uk/sites/default/files/assets/AAT_Code_of_Professional_Ethics.pdf Task 3) Conduct a sustainability evaluation of the accounting systems. Evaluate the accounting systems against sustainability principles by reviewing working practices. Identify any possible improvements that could be made to improve sustainability. 4 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Task 4) Identify weaknesses and make recommendations for improvement. Evaluate the system to identify significant weaknesses, which should be clearly explained along with their impact upon the organisation. For every weakness that has been identified there should be one or more recommendations made to attempt to improve the situation. The recommendations should concentrate on the effect that the changes would have both on the organisation and on individual members of staff. They may also highlight: o training needs; o aids to improve staff performance; o changes needed to organisational culture; o anything else which would improve the running of the accounting system. Prepare a Cost Benefit Analysis. At least one of the recommendations made should be subject to a cost benefit analysis. Whilst not all benefits are quantifiable, all costs are. Students should make any necessary assumptions or estimates to allocate costs to such items as time, unknown salaries, or any other unknown expense involved in the recommended changes. All benefits should be identified, including those that cannot be allocated a financial figure. This can include such things as improved customer relationships, improved documentation systems or staff morale (though this could be allocated a financial figure as improving staff turnover cuts recruitment costs). Note on appendices Any charts and diagrams or supporting evidence should be included here and cross-referenced within the text. Any appendices included should be referred to in the main body of the report or, in the case of supporting statements to cover missing assessment criteria, be mapped and cross-referenced on the mapping document. 5 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire A To Z Vehicle Hire Company history and management A to Z Vehicle Hire is a small regional car and van hire firm. It was originally three different firms; AA Milnes Car Hire based in Northfield, Vans to Go based in Southdown, and Midway Minibuses based in Midway. Vans to Go was set up in 2010 by Mo Khan who had been a builder by trade. An industrial accident had left him unable to return to work on building sites, so he decided to invest his compensation into a business that he could run himself but he was not certain what to invest in. Finally, he decided upon a van hire business because the firm he used to work for often hired vans and lorries when they needed more vehicles. He also did a little research and found there were no van hire companies within 50 miles, so he thought he would have a good chance of success. Therefore, in November 2010 he purchased ten Ford Transit vans that he bought new, and four Iveco flatbed lorries that had been previously owned by a transport firm. He employed his brother, Joe, as a general assistant and driver for delivery and collection of the vans to the customers' premises. Joe was also responsible for keeping the vans clean, both inside and out, and general maintenance of the vehicles. Mo did all of the administration and banking for the firm on a daily basis himself, and employed an accounting firm to prepare his annual accounts for Her Majesty Revenue and Customs (HMRC), the UK tax collection agency. Before the merger, Mo was getting concerned because he did not know whether he should register for Value Added Tax (VAT), the UK sales tax. One day in October 2011 after Mo, who is an avid football supporter, had watched his local football team, Southdown United, lose to a rival team, Midway Town, he noticed a group of supporters in a Midway Minibuses hire bus. He started to talk with them and met Peter Stoker, who owned the hire firm. With a mutual interest in both football and owning vehicle hire firms they struck up a firm friendship. Peter Stoker had bought his minibus hire business in 2009 after he received an inheritance. Peter's favourite uncle had died leaving him 50,000 and after buying himself a car, he was unsure what to do with the rest of the inheritance money. At the time, Peter worked as a taxi driver for a local taxi firm, A1 Cars. They had one minibus, and 14 cars and Peter often found himself driving the minibus. Often he was asked if A1 Cars did longer runs, rather than just sticking to the local area, and he regretfully told enquirers that they did not go more than 10 miles beyond Midway. This meant that they could not take groups to the airports, or to sporting events that were beyond this distance. Also they did not hire out the vehicles for self-drive, which was the answer to another question he had been asked in the past. Peter, therefore, thought there was a gap in the market for a good minibus hire firm - one which would provide buses both without drivers on a self-drive hire basis and also with drivers for long distance journeys, even allowing for overnight trips. Peter invested 140,000 in a Mercedes 15 seater minibus, which had one previous owner, and four new nine seater Ford minibuses. As he still lived at home with his parents, he rented lock-up garage premises to store the buses in when not in use, and he ran the business from his bedroom for the first year. After that, following much complaining from his mother about the phone calls and the house not being an office, Peter decided he had to both move out and take his business with him. He managed to rent a little shop on the high street in Midway, with a flat above it, which he moved into. The shop became his office, and he proceeded to run his business from there. Peter's girlfriend, Precious Jones, helped him with the administrative side of the business, and did his accounts for him. She worked as an accounts clerk in a local accountant's office, so had an understanding of what records needed to be kept. Peter was not very good at this part of the business and was happy to leave everything to her. Peter also preferred it when his customers paid in cash, and asked for this method of payment whenever he made a booking. 6 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire The other hire firm that became part of A to Z Vehicle Hire was a car hire firm run by Alan Milnes. Alan was 65 years old and looking forward to retirement so that he could spend more time with his wife Anna and his five grandchildren, aged from five months to 10 years old. He also wanted to make more time for playing golf, his favourite hobby. Anna was also suffering from ill health, and after spending the last 10 years helping Alan run the business she was also looking forward to retirement. AA Milnes Car Hire was a very successful firm, with a fleet of over 70 cars, ranging from modest Ford KAs, to large well equipped Honda Accords. The business was run from a small office in Northfield, above the garage premises in which the cars were stored. These premises belonged to Alan and Anna. Whilst most of the bookings were done from the office when people called in, or over the telephone, Anna had looked at the possibility of being able to take bookings through the internet, and had just started taking bookings via email (electronic mail). Anna was supported in the office by two assistants. When the Milnes made the decision that they both wanted to retire, Alan advertised that the business was for sale using Everest Estate Agency. This firm had a good reputation for selling businesses as going concerns and advertised them widely throughout the country. However, probably due to the economic climate in late 2012 and early 2013, very little interest was shown in the business. As Anna's health was beginning to deteriorate further, the couple decided that they had to look at another way they could make their retirement dreams come true, and they began contacting other vehicle hire companies, asking them if they would be interested in taking their business over. They sent emails to vehicle hire companies which were based within a 300 mile area of Northfield to see if there was any response. Unbeknown to each other, both Mo and Peter separately replied to this email saying they would be interested in meeting with the couple. Peter knew he could not afford to buy out such a reputable organisation, but he thought it would be interesting to meet with the couple. He also thought that he may have been able to pick up some more business; especially for the winter period when his cash flow was poor and his business was beginning to struggle. Mo was very interested in a buy-out scenario and, even though he did not know what the costs would be, he went to the meeting in a very positive frame of mind. In January 2013, all three men met together to discuss the buy-out. Mo and Peter were very surprised to see each other, as neither man had mentioned this opportunity to the other. Once it became clear how much money Alan Milnes and his wife had invested in the business, it was evident to both men that neither of them alone could afford to make any sensible offer to buy the business. Over lunch, Peter and Mo began to discuss whether they could buy out the car hire business if they went into partnership. When they discussed how much finance they thought they could raise, it became clear that this was not going to be a viable option once again. The meeting ended, much to the disappointment of all three parties involved. That night Alan and Anna had a long discussion. The next day they called both Mo and Peter back to the negotiating table. They then made a proposition to the two younger men. They proposed that all three men became equal partners in a new venture, which amalgamated all three car, van and minibus hire businesses. Their idea was that Peter and Mo would manage the day-to-day running of the new business. Alan would be a sleeping partner; not doing any work but being awarded one third of all profits made because of his investment in the business. For this he would allow his fleet of cars and his garage and office premises to be used by the new organisation; as long as both men would also put their vehicles into a joint vehicle pool. After a few minutes' contemplation and some discussion both Mo and Peter agreed to this and they all shook hands on this gentleman's agreement to share all profits equally. Both Peter and Mo were very pleased at this turn of events as neither of them could have afforded to buy out the business but this enabled them to expand. As Peter and Mo had become close friends and trusted each other they were more than happy to work together. 7 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Therefore in February 2013, A to Z Vehicle Hire was formed by the three men. As by now they had all become friends, no formal partnership agreement was drafted. It was decided that staff should be hired to cover the roles that Alan and Anna had run in Northfield, and that both Mo and Peter would run their own branch of A to Z Vehicle Hire in the towns where they lived. 8 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Mission statement To be the foremost vehicle hire firm in the region. The aim of A to Z Vehicle Hire is to provide the most comprehensive range of vehicles available for hire in the region. If we do not have the type of vehicle that you need we will endeavour to find this for you. We offer our customers an individual personal service of hire, regardless whether this is for cars, vans, lorries or mini buses. We promise that our vehicles are well maintained and serviced, and will be provided in pristine condition, both inside and out. All vehicles will be available for pick up at an office of the customer's choice, or will be delivered to the customer at a time and place most convenient to them. If drivers are required, these will be provided, and we promise that all our staff will be polite and courteous at all times. We promise to hold all deposits for a minimum time and will refund them promptly. Accounting and other information technology (IT) systems Below is an overview of the policies which were drafted shortly after the new firm was formed. Cash & banking policies March 2013 Monies In All banking is to be undertaken on a daily basis. All cheques are to be banked through head office. Any internet banking payments are to be directed through head office. Cash should be only accepted when there is no other form of payment possible. Cash should be banked in the HSBC branch local to the branch of A TO Z VEHICLE HIRE where the money was received. All deposits for vehicle hire should be paid into a bank account used solely for this purpose. Monies Out Only one firm bank account is to be held for withdrawal of money for business use. All cheques/ bank mandates must be signed by one of the partners plus the Accounts Manager All withdrawals must be supported by relevant documentation Business Credit Cards Business credit cards are only to be used for business purposes. 9 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Expenditure over 100 must be agreed by one of the partners. 10 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Petty Cash Petty cash for each of the three branches is to be kept securely by Branch Manager. A maximum of 250 of petty cash per branch is to be held at any time. All petty cash payments must be supported by valid receipts. Petty cash must be balanced and receipts must be sent to head office on a monthly basis. Bank reconciliations The Accounts Manager will perform a bank reconciliation on a month basis. Any discrepancies will be reported to the partners immediately. Wages and salaries All office staff are salaried and paid on a calendar monthly basis by internet banking. The two working partners are paid a salary. The mechanics are paid weekly by cheque for a 40 hour week, at an hourly rate of 10.50 per hour. Any hours worked over this are paid as overtime and paid at time and a half of the hourly rate. Drivers are used on a zero hours contract (no hours are guaranteed, and they may be asked to work anything from zero hours to 48 hours per week) and are paid on a weekly basis by cheque. They work one week in hand, so that they receive the money for any hours worked a week after they have completed the hours. The head office cleaner is paid in cash every Friday for the six hours per week that she works. Goods inwards policies All orders for goods inwards must be placed through the Accounts Manager. The Accounts Manager and the partners each hold a business credit card with a 4000 limit on each card. These should not be used for payment unless it is the only method acceptable. Credit facilities offered by suppliers should be used to the maximum time allowed. Payments should be made on time, and no creditor should be kept waiting beyond their agreed payment terms. For 'green' purposes, no remittance advices will be sent with payments. All payments will be made through internet banking unless the suppliers requests otherwise. Car hire policy Full details of the customer must be taken at time of booking. Name Address Telephone number (mobile and land line if possible) Email address (if available) All payment details will be taken at this time. All bookings must be supported by a customer deposit. The deposit will be 100 per day of hire up to a maximum deposit of 500. Deposits will be returned to customers after the vehicle has been returned in a timely manner; refuelled as necessary. The vehicle also then needs to be 11 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire checked over by staff to ensure that no damage has occurred during the period of hire. Deposits will be returned to the same debit or credit card that they were made on or otherwise by cheque. Deposits will normally be returned the day after the vehicle has been returned. Credit accounts may be set up for regular customers. In order for a credit account to be raised, customers must have hired from A to Z Vehicle Hire at least three times and returned vehicles on time without damage. All credit customers will be subject to a credit check and must supply one trade reference when applying for a credit account. Only named drivers may drive the hire vehicles. All rentals must be to named drivers only. All bookings must be supported by a copy of the driving licence of any and all named drivers. All vehicles will be prepared/delivered with a full tank of petrol. They must be returned in the same manner or else a refuelling charge will be levied. Information technology (IT) policy There are five computers owned by A to Z Vehicle Hire: three at head office and one at each of the two branches. The three at head office are all networked. Both branches are also equipped with a scanner and printer. The head office computers are loaded with Sage Accounting software, with a three user license. Only business software may be loaded onto the computers. No software may be loaded onto the computers without the specific permission of the Accounts Manager or the partners. All computers, software and hardware should only be used for business related activities. Employees of the firm are expected to use the internet responsibly and ethically. Internet use is limited to jobrelated activities only. Staff may use the internet and/or email facility for limited personal use during break times, but neither social media (for example Facebook, Twitter, LinkedIn) nor any instant messaging technology should be accessed at any time. All internet data that is written, sent or received is considered to be the property of A to Z Vehicle Hire. The firm reserves the right to monitor all internet usage and materials transmitted. Emails that are sent through the firm's system should not contain content that is deemed to be offensive. Unacceptable use of the internet by employees includes, but is not limited to; Sending or posting any discriminatory messages. Sending or posting anything that brings the firm into disrepute, is defamatory to the firm or its services. Sharing confidential information outside of the firm. Hacking into unauthorised websites. Perpetrating any form of fraud, and /or film/music or software piracy. If any breach of this policy occurs, disciplinary action may be taken - ranging from a formal warning to dismissal, depending upon the seriousness of the offence. 12 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Accounting personnel information Chandra Sorah, MAAT - Accounts Manager Chandra is 36 years old and married with twin sons aged 12 years. He was employed in February 2013 at the formation of the partnership. He was formerly an accounts office supervisor in a small engineering company in Northfield that had recently gone into liquidation, so he was very pleased when he was offered this role. The partners chose him because he had gained the AAT qualification around t10 years ago, and he appeared to understand the problems that small businesses have. However, he had not set up an office before and struggled in the first few months with writing policies and procedures. However, once this was done he felt better as the office now had a set of rules to work with. He is based at the head office in Northfield. Kate Gloss - Head Accounts Clerk Kate is 23 years old, single and lives at home with her mother who has a chronic illness and relies on Kate for much of her daily care. Kate worked for AA Milnes Car Hire for three years before the merger and was pleased to be asked to stay with the organisation when the new firm was formed. Before this, she was employed at a local accountant's office as an accounts clerk. She gained AAT level 2 and level 3 whilst she was there but did not progress any further with her training as her mother was so ill. At the formation of the partnership she was asked to take on the role of Head Accounts Clerk. In this role she was to be in charge of ensuring all deposits were taken and returned promptly; ensuring all hiring documentation was collected and stored securely and setting up and managing credit accounts for customers. Kate has always enjoyed her work, especially as Anna and Alan were very good about letting her work flexible hours to ensure she could provide care for her mother. She is also based at the head office in Northfield. Sue Li - Wages and Accounts Clerk Sue is 47 years old and was employed at the formation of the partnership on a part-time basis to take over some of the work that Anna Milnes used to do. She is now employed to work five half days per week. She has no formal accounts training, but is very experienced in payroll, as she used to run the payroll for the same engineering business that Chandra used to work for. Her main role is to prepare wages for all the staff, and to support Chandra in his role. Sue's hobbies are knitting and swimming. She has one son and two grandchildren who all live in New Zealand. Her daughter-in-law has just announced her third pregnancy, so Sue is eagerly awaiting the birth of her third grandchild. Mark Ancher - Accounts Clerk Mark is 22 years old and is Alan and Anna's nephew. He was formerly employed by Milnes Car Hire on a part time basis. He likes to work part time, as he is an aspiring rock musician, and the part time role allows him plenty of time to practice with his band. Two years ago, Alan paid for him to go on a computerised accounting course, but as Kate normally does all the computer data processing, these skills have not been used for some time. When the partnership was formed, he continued to work part time and even though the partners asked him to go full time, he still preferred not to. His main responsibility is now to ensure that the banking is completed and correct, and then to support Kate's work on the credit accounts. He works five half days per week and he prefers to work afternoons as he is often playing with his band late on some nights and therefore is not good at getting up in the mornings. He is also based at the head office on Northfield. 13 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Precious Jones - Accounts Clerk Precious Jones is 27 years old and has just got engaged to be married. She bought her own flat three years ago in Midway, which she shares with her best friend Jayne Mckenzie. She works part time at the Midway branch of A to Z Vehicle Hire, and she is the fiance of one of the partners, Peter Stoker. When Peter was running his own firm, Precious did all the accounting as a favour to him and was not paid for this. On the formation of the partnership she was asked to continue in the role, but as an employee. She, therefore, works for A to Z Vehicle Hire on Fridays to do the accounting work for the Midway branch, and works four days a week in her main job in an accountant's office. She has no formal accounting qualifications but does have an A level in accounting gained just under 10 years ago. She has been asking her main employer for some time if she can have more training, but they have not been forthcoming. Precious's employer does not want her to leave and has therefore offered her AAT training free of charge if she signs an undertaking that she will work for him for the next three years. Joe Khan - General Office Assistant Joe is 26 years old and is the general assistant at the Southdown branch. He is the brother of Mo, one of the partners, with whom he shares a rented flat. Joe was originally employed as both a general assistant and a driver but at times as the business has grown, Mo has ended up using Joe in the office as an administrative assistant, doing general jobs, but also looking after the petty cash. When the merger came about, Mo realised that the other branches had an accounts clerk and he did not. Also, he wanted Joe to have a regular income and, as the drivers were to be employed on a zero hour basis, he realised that he could only provide that if Joe became a member of office staff. However, being in the office and doing paperwork is not Joe's ideal job and he much prefers to be driving or preparing the vehicles. There are also twenty drivers, nine mechanics and one cleaner employed within the organisation. 14 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Diary of events for last six months February The merger occurred last month and the new staff had just started. Things were in disarray. Chandra, the new Accounts Manager had not realised how difficult it is to set up an office. He spent all of this month writing policies and procedures for the firm and still trying to run the accounts department. The firm rented an office in Midway for Peter's branch. Peter had been running the business from his garage previously but the other partners did not feel this was suitable, so they rented a unit on the industrial estate, and transferred the new business there, On the last Friday of the month, Chandra was so busy he asked Mark if he could possibly undertake the bank reconciliation this month and Mark agreed to do this. However, Mark was leaving early as he was playing a gig with his band, and he left the bank statement in his in tray on his desk, so that he could do it when he came into work on the next Monday afternoon. On that Monday, Mark struggled with completing the reconciliation and after wasting two hours he decided that, as he could not make it balance, he would alter the Cash Book, so that the account balanced. He therefore altered a payment from one of the credit account customers from 600, which showed on the bank statement, to 300, which showed on his account. He then also altered the entry in the customer's account - as he was aware everything should balance - even though he was not sure there was an error on the customer's actual account. Alan called into the head office to see how Peter and Mo were getting on, and then called into the garage to see the mechanics. These had all worked for him previously, and they still called him 'boss'. He was very pleased to see that the car wash machine which he had bought just before he retired was being used. It was a state of the art machine which cleaned all of the water used, so that it could be reused. March Alan asked Peter and Mo if they could have a meeting and if they could bring monthly accounts to this, so that he could review the progress of the partnership and ensure his investment was safe. Peter said this would be fine, but asked if Alan would mind waiting until next month as Chandra was still writing policies and procedures. Peter then called Mo and asked whether they produced monthly management accounts, which was not something he had ever done before. Mo said 'no', and that this was something they would have to raise with Chandra. He had told Chandra that only quarterly accounts would be needed. A local school approached Chandra and asked him if he was able to take a school pupil for a two week placement to give her work experience in an accounts office. Chandra explained that the office was still being set up, so he could not do this but that he may be able to help at a later date, One of Peter's regular customers called into the office and hired a minibus and a driver for a trip to the races in York, which necessitated the driver staying overnight for three nights. The customer had paid the 400 deposit over to Peter in cash, which had been normal practice in the past. Peter just put this money in the cash tin in his office drawer, alongside the petty cash money. Two days, later the driver allocated to this trip called into the office and asked Peter who was going to pay the accommodation bill and how he should cover the cost of the petrol for the journey as the minibus would need filling up at least twice. Peter assured him that the customer was responsible for the cost of the petrol and this would be paid directly to the garage. However, he would have to cover the cost of the hotel himself and then claim it back as an expense. The driver was not very pleased about this and told Peter he could not afford to do this. Peter then offered him the business credit card, and told him the PIN (personal identification number) so that the driver could use it to pay the bill. The driver was not sure about this and 15 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Diary of events for last six months continued felt that this could get him into trouble, so Peter opened the cash tin and gave him 400 in cash (which was actually the deposit money, which he had forgotten to bank). Sue had undertaken a review of the wages and salaries processes and sent an email to the partners suggesting that as the office staff received the same salary every month, they could stop producing monthly paper pay slips, and everyone could just receive an emailed pay slip on a monthly basis. This would save the cost of the Sage printed payslips which were very expensive at over 20 a box. The partners agreed to this on a trial basis for three months, and felt that they could even use this for the mechanics if it worked for the office staff. April Things began to run a little more smoothly but Chandra was still busy so asked Kate to complete the bank reconciliation statement. She could not get this to balance. When she reviewed this and went back to the previous statement she realised that Mark had not completed the bank reconciliation correctly, and had altered the cash book in error. One of their regular customers, Roberts the Builders, also telephoned that day and complained that his statement was wrong, as Mark had also altered this erroneously. Kate said she would look into this. When she talked with Mark, and asked him if he had altered the Cash Book and customer's account he said 'don't blame me, it's not my job to do the bank reconciliation, and anyway, I am not even sure how to do it'. Kate realised she should tell Chandra, but she liked Mark and felt that Mark was being asked to do so much more work since the merger, she decided to cover this up for him, without telling Chandra of the error. Alan once again asked for a partners' meeting and Mo and Peter agreed to this. At the meeting they then told him that they were only going to produce quarterly accounts, as this should be sufficient. Sue asked to go on a two day HMRC training course for Real Time Information (RTI) which was being provided locally and would affect how the organisation ran and managed the payroll. (RTI is a new process whereby HMRC gathers electronically submitted data every month). It cost 400 for the two days, but she felt that it was worth the money to ensure she kept up to date which the changes coming in. Chandra reluctantly agreed and authorised the payment. When she came back to work she assured him that the course had been very worthwhile and offered to run a training session for the full team to share the information. Chandra assured her there was no need for this as she was the payroll clerk. One day late in the month, Joe was sitting in the branch office at Southdown chatting to one of the drivers about the poor performance of the local football team the day before, as they had lost again. He was even more annoyed as one of the players, Martin Fowler had hired a car the day before and it had been returned dirty and full of fast food containers. Joe and the driver decided to let their team know how they felt about their recent performance by posting a comment on the team's Facebook page. After doing this, the driver went off on his next job, but Joe continued to play around on Facebook, logging onto his own page and updating his status to 'Bored!' He then went back onto the team page and commented that Martin Fowler if gave up eating burgers and he might be able to run faster and that if he could not give them up then he should learn how to clean up after himself. May The annual Northfield carnival was running this month and the local scout group leader phoned A to Z Vehicle Hire to ask if they could have the use of a flatbed lorry for that weekend for the carnival parade. As this was a charity event Chandra agreed and offered them the use of the lorry free of charge if they would cover the cost of the driver's time. 16 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Diary of events for last six months continued The scout group was more than happy to do this, and Chandra promised to let the group into the garage on Saturday morning so that they could prepare the lorry for the carnival. Sue took a booking over the phone late one afternoon for a Daimler limousine with a driver for the next day. She did not normally work afternoons but had swapped with Mark as he had a booking for his band and it was over 50 miles away, so he wanted to leave at lunchtime. As she was just about to leave, she quickly took down all the credit card details, and promised that the car would be in impeccable condition, as the woman hiring it said she needed to make a good impression. The Daimler was despatched early the next morning to the hotel that the woman had asked to be picked up from. She spent the day shopping and covered over 200 miles in the 10 hours in which she had the car. The driver said he was exhausted once he dropped her back at her hotel but was pleased that she had told him to add 50 to the bill for his tip. He told this to Kate the next morning, who then set about raising the charge to the credit card. She was very surprised when the credit card company telephoned her to say that they were refusing payment which Kate queried. She confirmed that the customer was not present when the payment was requested, and that it was a telephone booking. The credit card company informed her that the card had been used fraudulently, and when Kate checked the address that Sue had been given, it turned out to be false. Sue had also not bothered to process the deposit as she felt that it was such a short notice booking that the payment would be made immediately. This meant that the firm lost the cost of the hiring, which for the executive car was 100, plus the petrol costs of 50 and the payment to the driver for 10 hours work of 80. The driver lost his tip! Mo wanted to go to the football European Cup Final in June, and he was trying to plan how his branch could be managed without him. He thought Joe could manage most of the work, but not the administrative side of things, but Joe assured him he would be fine with it. May was a very busy month with two bank (public) holidays, and Chandra asked all the staff if they were willing to work extra hours this month. He was disappointed when only Sue said she would to this, but even she was only willing to do this if she could have the time off in lieu. June Kate's mother had been very ill in hospital for the past three weeks but was now coming home. Kate asked Chandra if she could work from home whilst her mother was convalescing. Chandra, regretfully, said this was not an option and that if she wanted time off to look after her mother she would have to use her annual holiday entitlement. Kate therefore took three weeks' leave but was really upset that she had had to use most of her leave to care for her mother. When she returned to work, Chandra was very distracted and when she queried this with him, he told her he was worried about the cash flow. He instructed her to chase up any of the debtors who were late in setting their credit accounts, as they had had some large bills to pay for replacement parts and they had already reached their overdraft limit. Alan stormed into the office on the Monday morning that Kate returned to work. He was extremely angry. Whilst on the golf course the day before, he was surprised to be approached by Dwayne Edwards who was a regular user of the executive cars from AA Milnes and now A to Z Vehicle Hire. Dwayne complained very loudly that he had used the car hire service twice last month, but was upset to find that the rental deposits had not been put back into his credit card account, and it was now four weeks later. Alan was upset that the good reputation he had built up over the years he had run the business was being compromised. He had apologised and promised Dwayne that the repayments of the deposits would be made immediately. Kate explained that she had been off work to look after her mother, and that no one else had checked to see if the deposits had been returned. 17 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Diary of events for last six months continued She then started to make all the repayments back to the customers for these deposits. She was surprised to find, however, that there was not enough cash in the bank account used specifically to store the deposits to make all the necessary refunds. She could not understand why this was, and when she went to talk this through with Chandra she was even more surprised when he said he had paid three invoices out of that account, due to the cash flow problems. He felt that as this money all belonged to the firm, and the cash flow shortage was a temporary situation, the money could soon be replaced into the deposits bank account. Mo was on holiday for the second week in the month. Joe stood in for her with little problem for the first three days, but when he came into the office on the fourth day he could not get the computer to start. He tried unplugging it and plugging it back in again, but this did not work. He rang Precious for help but nothing she suggested worked, so in desperation he rang Peter in Midway. Peter could not leave his own branch so he rang Alan and asked him if he could possibly take a laptop computer down to Southdown so that they could continue to operate. Alan was a little annoyed as he had already suggested that each branch should have a laptop available in case of computer troubles. However, he got into his car and drove down to Southdown and set Joe up on the laptop so he could log onto their website and continue with business. Whilst he was there, a customer returned their car and asked if they could have their deposit back in cash. Joe went and checked the car over, and then took the petty cash tin out of the desk drawer and proceeded to refund the customer's 200 deposit in cash, even though he had paid it by cheque. July Precious was on leave from her main job and dropped in for coffee with Kate at the head office whilst she was shopping in Northfield. They had a good chat and Precious was pleased to hear that Kate's mother was doing well and her health was improving. Kate was complaining how busy she was and that she really did not even have time to stop for coffee. Precious said she was more than happy to help on her day in the Midway office, but that she would have to do this in Midway, as she could not get to Northfield on a Friday. When she was talking about this with Peter later, he suggested that he bring her the Sage software and she could upload this onto the computer at the Midway office and she could at least process their branch work. Precious thought this was a great idea and so Peter called into the office the next day and picked up the copy of the Sage software and uploaded it onto the computer at the Midway branch office. On Friday, Peter once again took a cash payment for a car hire, but as he had not managed to go to the bank and was short of cash for the weekend, he just put the money in his pocket, promising himself that he would go to the bank on Monday to draw cash out to replace it. After a busy weekend helping Precious to decorate her flat he totally forgot all about putting the cash back. It was only when Chandra completed the monthly bank reconciliation, and went to report a shortfall that he remembered this. The partners decided that as most of their vehicles were now over three years old that they should consider a programme of replacing the fleet of vehicles. Mark and Joe were tasked with trying to get the best possible prices on suitable replacements, and preparing costing for this. The partners then arranged a meeting with the bank to talk about financing. Alan asked if they had monthly accounts prepared yet as he was certain that the bank manager would need to see these before agreeing to any financing package. Once again the local school approached Chandra to take a pupil on a work experience placement. Chandra, apologised again and said that they were just too busy to spare anyone to look after a school pupil who he thought would be more of a hindrance than a help. 18 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Diary of events for last six months continued Precious told Peter she needed to talk to him in confidence. She was very concerned that a prospective client had come into the accountant's office where she worked to discuss with the accountant a new business venture he was considering. She had overheard them discussing how he wanted to set up a business of a car club, where cars are hired by the hour and are dropped off and picked up at set locations. All the bookings would be over the internet, and very few staff would be needed to run this type of operation. She felt that this new venture could harm A to Z Vehicle Hire and thought they should consider this option as another way to hire cars. Whilst she would not normally have told Peter anything about her work, she considered it to be only an idea that someone, who was not as yet a client, was proposing. Besides, now as she was engaged to be married to Peter she felt she was a part owner of the A to Z Vehicle Hire business. Chandra told Peter that he had not yet prepared the quarterly accounts, and as Peter knew the bank would require these, he asked Chandra to use the last quarter's accounts but increase the figures to show 80% more income and a 60% increase in net profit. August August was very hot; it was the best summer weather the region had experienced for many years, and bookings were very high. With very few vehicles left for hire that month, almost all the cars were already booked out. Now that the new fleet purchase had been agreed Mo, Peter and Alan discussed the possibility of opening another branch in Eastleigh, and the possibility of letting Joe run this. Mo thought that the new branch was a great idea, but was unsure about Joe being a branch manager as, only last week, he had undercharged a customer by 100, which Mo had then needed to recover from the customer. Peter took Precious away for a week's holiday to Scarborough, but had not thought about who would run the business. He asked Mo if Joe could come over, but Joe was needed in Southdown, so Peter rang Alan and asked him if he would mind covering the Midway branch for a week. Alan felt compromised; he was meant to be the sleeping partner and did not mind helping out in an emergency, but he did not want to commit himself to working a full week, especially as there was a large golf tournament taking place that week. Chandra was so busy that once again he asked Mark to complete the monthly bank reconciliation statement. Mark was unhappy about this, as he was not certain he had the skills to do it, but accepted the task with reluctance without saying anything to Chandra. Kate's mum was ill again, and she did not want to use up the only week's holiday that she had left so she decided to ring in and pretend to be ill. She did not like to do this, but felt that this was her only option, especially as she booked a week's holiday to Benidorm in Spain during October. Chandra did not want the problems that happened the last time Kate was off to recur, so he asked Mark if he could work full time, and take over Kate's duties whilst she was ill. Mark was not happy about this, but as he had already refused overtime he thought he had better show willingness, especially as Chandra had asked him on the day that his Uncle Alan was in the office for a meeting with Mo and Peter. Mark therefore worked full time for the week, but whilst he could cover the Kate's general duties that Kate, he could not process refunds. Therefore, once again the deposits were not refunded on time. As Mark's Sage skills were so out of practice, it took him all week to process what Kate could have done in one day. When Kate came back to work she therefore found the accounts to be in a mess once again. She had to spend a full day reviewing the work Mark had processed and preparing journal entries to correct his errors. She also still had to catch up on the refunds of deposits. This time she felt she had to say something to Chandra, who reluctantly went to see Mo and Peter and informed them that the office needed more staff, especially as the business was beginning to develop more. After some discussion and a review of the business needs, the partners agreed to hire a new accounting technician to manage the monthly accounting reporting, undertake special projects and to work with the partners. This would allow Chandra to manage the office and ensure that the daily accounting duties were completed. 19 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Diary of events for last six months continued September Mo and Peter were out looking for premises to use for the Eastleigh office. They had dome some research and felt that a branch there would only increase their profitability. The only thing they were concerned about was who would manage this branch. They had asked Alan if he would be prepared to work three days per week to set up the branch. Sue came into work with a large smile across her face and proudly announced she was a grandmother again, as her daughter-in-law had given birth to a little girl, Abigail Louise, that morning. She then went on to tell Chandra that she wanted to go to New Zealand for four weeks, so that she could help her family out with the new baby. Whilst he wished to let her have the time off he informed her that as she was the only one who could process the salaries and wages it would mean difficulties for the organisation. He said he felt they could cover her for one week, but four weeks would cause problems. Sue stated that she had every right to have her holidays, and she had saved up her full allowance for such an occasion. When Alan heard of this he told Peter and Mo that they had to let her have the time off, even though they would have to bear the expense of a temporary wages clerk for the month. Chandra said that in the past in his old firm when Sue was off she would prepare wages and salaries in advance, and that surely she could do this now. Sue informed him that this was now not possible due to RTI which had become mandatory from April 2013 When Alan queried what RTI meant she told him about the changes to payroll and he wondered why the partners had not been aware of this before now. Sue left work happy that night as she went home to pack in readiness for her trip. She had managed to book a flight online at a good price to New Zealand that afternoon, after she had arranged for a temporary wages clerk to replace her for the month. As it was Friday and Joe had a long weekend off, he decided he would go away with a friend for the weekend. All packed, both he and his friend climbed into his car on the Saturday morning looking forward to a long weekend away. His heart sank when his car refused to start. On checking the engine he found that the gear box had seized up, and it would take all day to replace it. Instead he had a bright idea: he ran over to the industrial unit, and - as there was no sign of Mo about - he picked up the keys to the Vauxhall Astra, one of the cars in the new fleet recently delivered, and decided to \"hire\" this car for the weekend. Alan came in for a partner's meeting to discover that the quarterly accounts had still not yet been prepared. He was beginning to get annoyed by this, but hoped that when the new accounting technician started work next month things would change. He was getting a little concerned about the amount of time that Mo and Peter were now expecting him to come into the office and felt that they were going beyond the spirit of their informal partnership agreement. The following Monday you start your new job role as Accounting Technician to A to Z Vehicle Hire. You have achieved your Level 2 Certificate and level 3 Diploma in Accounting in your AAT studies and are currently working towards the level 4 Diploma in Accounting. 20 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Appendix 1 Original source: http://wikitravel.org/en/Renting_a_car Renting a car Travelling by car can get you places which can be very difficult to reach by public transport or tour. It gives you the convenience of going your own way, in your own time, and it can often be cheaper than public transport alternatives, especially if travelling as a couple or a group. The downside is that in some places, traffic conditions may differ wildly from what you are used to, and foreign conditions can add stress to your travels that you can do without. In some circumstances it may be better to rent a car with a driver. In countries where wages are low, this may not cost significantly more than the cost of the car alone. Pricing Base price Price is normally calculated by number of days. Usually the more days you take, the less you pay per day. Cars are classified according to a class, small to large, prestige and specialty vehicles, and there is a sliding scale of prices for each car class. When you book you are usually given an example of a car type in that class, but it need not be that type you are receiving. Rental car companies normally permit a small amount of time, usually around an hour, for late returns. After that they can charge up to another full day rental for a late return. If you know you are going to exceed the rental period you can often call the rental company and arrange an extension. Normally the standard contract rate (without discounts) would apply. Most rental companies have a one day minimum rental period. Price for durations less than a day normally are not regulated. If you need to return the car at significantly different time of the day, you can try haggling to get extra hours for free . Insurance Surcharges If the car is damaged or stolen, or if your car damages another or injures or kills someone, your liabilities (to the rental agency and/or others) can go far beyond the fee you agree to pay for the rental. In addition to paying for any repairs required, the rental car company will charge you for any loss or revenue while the car is being repaired, and administration costs for managing the repair. Usually when you come to rent a car you are presented with several insurance options. Some of these are: 21 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Renting a car continued Collision Damage Waiver - sometimes included in the rental cost, this reduces your liability in case of an accident to a fixed amount advised by the rental agency. Theft Liability Waiver Windscreen Breakage Insurance - sometimes a small extra daily fee will cover you against the cost of windscreen damage Excess Reduction/Super-CDW - reduces the deductible amount in case of an accident to a lower or sometimes eliminates all liability. Can be a substantial cost on top of the base price amount. Third party insurance Personal Effects Insurance - covers loss of personal items in the car when it is stolen or damaged. You should take the time to consider the insurances offered, how they affect your liability, their cost, and whether your personal car insurance, travel insurance or charge card (used to rent the car) provides partial or full coverage. Sometimes some of these insurances and surcharges are compulsory, e.g., in foreign countries where your personal insurance doesn't offer coverage. Sometimes some coverages are built into the base rate. If insurance or waivers are optional, consider the following before accepting the charge: 1. As above, if you have an automobile insurance policy on your vehicle at home, check to see if it includes coverage for rental car damage. 2. If you plan to pay with your credit card, check also to see if it includes rental car coverage. Be aware that in many cases this coverage is secondary (meaning your existing auto insurance coverage pays first). 3. If you have purchased a travel insurance policy that covers trip cancellation, medical expenses, etc., check to see if it includes a rental car collision/loss benefit. Some packages do, providing primary coverage up to a certain amount. (Primary coverage means that the insurance pays before other policies, including your own auto insurance.) Depending on the amount of insurance you buy, the per-day charge for a travel insurance policy that includes rental car coverage can work out to less than the per-day amount of a waiver. It is usually cheaper to purchase travel insurance than to pay for the Excess Reduction/SuperCDW at the rental counter. Rental companies tend to prefer bona-fide visitors rather than local renters when it comes to excess levels and excess reduction. Sometimes these are lower for international visitors booked in advance, for airport renters with a flight number, or for people using a corporate discount code. 22 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire Many of the insurances are void if you use the car in a manner not permitted by the contract, e.g., driving under the influence of alcohol or drugs, using it to commit a crime. Renting a car continued Distance charges Some rental agreements may have a limit on how far you can travel per day or in total, and will charge for additional distance travelled. Others have unlimited mileage. Even with unlimited miles, you may see limits that confine you to adjacent states or regions. Getting those limits relaxed may involve added fees; violating them may generate stiff penalties...all in the rental contract. Other surcharges Rental car companies are notorious for finding additional surcharges, sometimes not added until the point of sale. These can include location or airport taxes, improvement fees and other surcharges, admin surcharges, registration recovery surcharges and other local taxes. Sometimes local taxes are not just the local sales taxes, but also local vehicle taxes that are "recovered". At the Las Vegas airport, such fees can increase the cost of a rental by close to 60%. This practice has become so notorious that some consolidators promote themselves on the basis they guarantee to offer a fully inclusive price, but check the fine print. Choosing a car and optional extras You need to choose a car to meet your needs. If you can't drive a manual transmission (stick-shift), check that your rental car is equipped with an automatic transmission. Rental cars in most of North America and Australia as well as some parts of East Asia normally come with automatic transmissions. Rental cars in the rest of the world, especially Europe, Africa, and South America, will usually come with manual transmissions, and renting a car with an automatic transmission is much more expensive. Check there is room for all the passengers and luggage you will be carrying. The car may not be the exact model you booked, and the boot (trunk) space may vary. 23 Live assessment: Internal Control and Accounting Systems ISYS 2: Assessment book - A to Z Vehicle Hire If you are travelling on unsurfaced/gravel roads you may want to consider a car with high road clearance or 4-wheel drive. Renting a car continued Most rental car agencies can rent you a GPS navigation system with the car that is preloaded with maps for the relevant city and region. Sometimes the system is already built into the car; sometimes they will give you a portable unit to attach to the dashboard. GPS navigation when driving in a new city can save you a considerable amount of time studying maps while trying to get your bearings. Check the price carefully, as GPS navigation rental for a week can sometimes cost as much as simply buying one. Rental car companies often rent child seats or booster seats. If you are flying with a young child, sometimes you can take your seat on the plane to save the cost of this hire. Make sure the seat you have will attach to the car you are hiring and complies with the relevant local standards. Most industrialized countries are going to electronic toll collection (ETC) and replacing traditional toll plazas with toll gantries that read transponders and license plates on passing vehicles. Some rental car agencies include transponders across their entire fleet; others rent them at the counter. If you do not make appropriate advance arrangements with the rental car agency for toll payment by renting a transponder, the rental car will get hit with a fine by the toll road operator, and the rental car agency will pass on the fine to your credit card along with a "convenience fee." Booking and hagg