Part 1 - MK Enterprises Case Study Information

RJ Enterprises Pty Ltd is a fast growing company. It was registered as a company with ASIC on 15 June 2009. Sales have been going through the roof and everybody has been frantically trying to fulfil orders and keep customers happy, however, there has been a growing disquiet with the CEO that corporate governance compliance issues have been overlooked, and that for all the high volume sales there may be some poor results being generated for the company in customer goodwill and with the regulatory bodies.

The CEO has asked you (the Business Accountant) to go and investigate the paperwork and interview the sales manager and accounts people to get all the facts.

On 1st August 2011 you begin your investigations, into the paperwork and conduct interviews with the key people. After a few days you are back at your desk with your notebook and go through the following points that you noted as you conducted the audit.

1.The 3 monthly BAS for June 2011 has not yet been completed and lodged.

2. The sales manager wants to get rid of the archived financial and employment records from 2 years ago. She says that they are taking up space that could be used to hold selling stock.

3. The sales manager had also discussed other revenue raising options like selling the list of the few thousand people that had entered the 'Give-away' competition to a marketing company. She said it would be making money for nothing.

4. Before the sales person left he said that a customer had asked to see their records, but the sales person refused, saying that the customers' records were private and confidential and belonged to the company.

5. There was a payment of interest earned from deposit funds for $300 credited in the company's June bank statement, but it was not recorded in the 30th June 2011 accounts.

6. The warehouse manager kept a clean, well-organised office because as he says 'I don't bother to keep the inventory records, otherwise the place would fill up. Anyway, they are not important once the stock take is done and entered in the system'.

7. The company has a common seal, but does not have the ABN (Australian Business Number) or the ACN (Australian Company Number) number on the imprint.

8. The accounts payable clerk approved a stationery order for $2,628, but on checking her financial delegations in that role, you noted that her limit was $1,000 per transaction with any single supplier.

9. The ASIC annual return from ASIC was still not completed, even though it was received on the anniversary of the company's registration.

10. The accountant told you that the company had decided to change the registered office to the bookkeeper's office on the 15th June 2011, but when asked, the accountant said he was too busy to lodge any forms.

11. In searching through the files you note that for the past two months the number of report deadlines missed rose from 10% in May to 50% in June.

12. Mistakes in invoices requiring a credit/debit note adjustments had also increased from 1 % in May to 5.5% in June.