Case Study: Paradise Industry

This case study analyzes the expenditure and cash conversion cycles of Paradise Industry, identifying weaknesses and proposing changes to reduce risks. It includes a system flow chart of the expenditure cycle and the cash conversion cycle, as well as an analysis of internal control weaknesses and risks. The report concludes with recommendations for improving the organization's processes and implementing effective risk management strategies.

Case study- Paradise Industry

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The report is based on two concepts: a cycle of spending and a cycle of converting cash.
The chart shows how and where the order is put, how many copies are needed to be issued in
order to execute the procurement which may also explain how the work in progress is handled
(Zeine, Ossia Inc, 2019). As well as in the report vulnerabilities have been addressed and
proposals for the new procurement process have also been made. The other term, that is the cash
conversion cycle, addresses the time and probability of exchange into currency and also the
entire cycle phase.
MAIN BODY
1. System flow chart of expenditure cycle
A flowchart is a kind of diagram representing a procedure or workflow. A flowchart may
also be described as an application diagram describing a function step - by - step. The
flow chart displays the measures as various styles of boxes and how the boxes are related
with the markers (Jiang, Zhang and Chen, 2019). There are different types of chart and
expenditure flow chart is one of them which are explained below in such manner:
This can be defined as a type of chart which consists information about expenses of each
head or department in a business entity. By help of this chart, it becomes easier for
companies to find out who is responsible for higher expenses. Herein, below flow chart
of expense is presented in such manner that is as follows:

This inters - departmental predefined standard an institution's cost recovery process. The
timetable is displayed in a table view. Section of this table reflects different organizational units,
while each main stage of the repayment cycle is described under the section of such a division.
1.1 Analysis of physical internal control weaknesses in the expenditure cycle

1. Possible weaknesses Structural weaknesses
• The income cycle system: Most RC exercises are conducted and over-charged by the
accountant (AC), especially RC, exchanges and procedures. The customer's application is
obtained and accepted by it, produces documents for the sources of RC, such as slips and tender
packaging, but retains the general stock and invoices of actual transactions as well. False actions
can happen here. The CA may be inconsistent with the buyer for products and confuse the user
(Crews and Butterfield, 2020). The consumer can still have more expense, however it tracks and
informs on the sale with the same price.
• Expenditure cycle system: Under one department, the Group integrates enrollment,
certification and care; delivery, procurement and stock (R, P & IC) control. That is a breach of
duties separation. Many EC activities are performed by R, P and IC with other corporate roles, in
specific EC, transactions, or procedures. It makes applications, receives organized returns,
analyzes and stores inventory, and publishes a data archive on accounts payable. False actions
can happen here. For examples, the workers of R, P and IC will have contradictory roles on the
dealer and will confuse the chairman / owner; they will also take untidy soup (except hard food)
and none can take caution.
2. Weaknesses of documentation and commercial actions (methods)
The identification and economic operations of giant eggplants can be at risk throughout
the purchasing cycle:
 For example, good numbers in the CE archives do not conflict with the number of
registers. The development and separation of the performance / report can be challenging,
particularly as the company starts to adopt a new accounting system.
 The accountant supports the proposal explicitly by reviewing customer's payment history
(company management system or customer accounting source) during the contract
request process. It seems the customer has not done the company much work yet.

Internal control weaknesses (IC)
The possible shortcomings of the general control of the body's RC structure are:
Organizational Controls
 Accounts of employees; a broad range of tasks such as expenses, revenue accounts,
extensive inventory and knowledge processing can be excluded (Kostka and Krzych,
Estimote Polska Sp zoo, 2019). This can trigger AC-client incompatibility. Moreover, the
President / Owner will not evaluate the exchange reports.
Documentation checks
The RC documents are not complete:
 Several copies of the records of selling orders (CO) are needed since one is not adequate.
If the accountant actually instructs CO data on the line, it seems possible that an
operations manager may insert inaccurate data, which can contribute to incomprehension.
 There is no clear CO for telephone communication recorded in the consumer and the
Documented Order of Recognition (OA), and there is no heavy power and no shortage of
facts in the exchange.
Resource responsibility checks
 The workers insist that products from the development of warehouses be organized by
shipping to ensure, at least when they are not validated, that the oral request is issued by
the AC or the governor or proprietor, that the delivery personnel (report) is identified at
the time of conversion. This is risky because it will produce outcomes, but no proof
remains.
Executives exercise controls

No organizational strategies have been established for the RC, such as the credit authorization,
account rights, contracts and collection methods; this can lead to discomforts as the group is still
developing and uses more people to manage the RC exercises (Guerra and Kulchytskyy,
Sugarcrm Inc, 2020). RC procedures may be implemented in conditions of confusion and
incoherence owing to the lack of production processes. In addition, it is difficult for the
organization to prepare for its substitution when the accountant leaves.
The possible shortcomings of the general control of the body's EC framework are:
Organizational Controls
A lot of obligations reside with the employees involved in the receipt, purchase and
monitoring of an account, for example from the inventory management, credit liabilities and data
management. R, P and IC staff completes most of the CE components. This could contribute to
an unethical role.
Document checks
CE documents are not complete as there are no adequate documents of:
 The purchasing form stating that the device setup is not permitted.
 An order for payment, suggesting no formal exchange officer.
 Upon receipt of the reassessment paper. For stock exchange and further research, this is
important.
Internal controls suggested
For the RC framework:
 Complicated business structures should be developed for RC, including loan agreements,
account rights, and processes for sharing and processing.
 Revisions should be performed in accordance (with the likelihood that they were
established) with the processes and practices for negotiation and receipts.

 The independent audit and the audit framework will be issued on a regular basis by
exchange mails, such as cash refund journals and reimbursement papers.
CE Framework:
 Management techniques for the buying limits, returns on buying and the method of
buying and administering cash should be developed.
 The acquisition techniques and cash transfer arrangements and negotiations (in the case
of negotiation) will be checked.
 Managers regularly monitor mobile account audits, verify violations and reports.
 Monitoring should take place to avoid stock robbery and prevent employees, such as
stock unexpected events. These internal controls' guidelines are in accordance with the
internal control software COSO monitoring and audit features.
System flow chart of conversion cycle
Flow chart of cash conversion cycle- This can be defined as a type of chart which
consists detailed information about those activities that are linked to converting current assets
into cash (Selvaraj and Aziz, 2020). Below a flow chart of cash conversion cycle is presented
that shows value of each period in order to converting current assets into cash:

2.2 Analysis of the risks exist in the conversion cycle and the changes needed to reduce the risks
An organization independent of the possibility of breakup should be known to be a
persistent problem in the coming months. This norm functions desperately to secure funding for
an entity, because banks recognize that an institution should take steps to receive funds for
payment of its obligations. Therefore the probability of a company going into the loan
arrangements decreases if an entity is accused of staying in operation. It also seems that large
credits or loans are difficult for the organization. This risk is mirrored in the cash exchange
process of a company.
Types of risks involved in cash conversion cycle:

1. Delay in Payment- The real problem starts if longer clients spend and AR also drastically
rises. Probably the toughest remedy for this is that the company funds the deficit from banks.
This is dangerous since the current position will not form part of companies or finances, but is
the priority of tenants (Nisenzon and Jain, Fotonation Ltd, 2019). To speak to the tenant of the
enterprise and to optimize the AP DO will be a smart move to handle the growth of the DO. The
result is a number of organizations, which attract money and work exclusively to pay their
tenants.
2. Decline in Liquidity- A wise community liquidity evaluation is critical as lower liquidity
contributes to a liquidity risk increase. Financial analysts and consultants contribute to
generating profits and to getting adequate resources sufficient to meet usual demands of a
company, and retailers are dedicated to deciding that an entity usually has the ability to
compensate for products that are delivered for procurement. Liquidity, for example when
answering queries, is often a requirement for external assessors to assess obligations.
3. Void Invoices- Someone who wants to serve a manufacturer, service provider, and borrower
may contact a company. It could be necessary to communicate by call, post, fax or e-mail. The
scammer demands that the bank name (e.g. the recipient's name) for the next receipts be updated.
Currently, the planned new account is operated by the scammer.
4. Lack of inputs- Absence of data bases for operating processes, such as production rows, e.g.
related manufacturing methods.
5. Deficiency inventory- There may be depression stocks leading to difficulties, poor corporate
predictions and deceptive stocks which should have limited intensity of sales on a regular basis.
A design brand, for example, offers a 3-form model shoe. The shadows almost never sell one
month after the beginning of this season and would only be cancelled for the next show
(Kasower, CONSUMERINFO COM Inc, 2020).
6. Acutely sharpened- An essay creates greater demand than anticipated and is quickly sold out.
This can talk about missing income if the deal window is small. For example, a well-known
Christmas toy might generate a sensation in January.

7. A worthy loss- An object, component or material is on the rack every day and is cheap to find.
Value may decrease quickly because of other competitor inputs or indefinable transportation
costs.
8. Natural hazards- There are an object, component or material on the shelf every day that is
cheap. The value may quickly decrease because other competitor inputs or transport costs cannot
be quantified.
9. Channel index- The stocks transported to facilities of transport lead to an uncommon form of
inventory danger. Often backers have the option to redeem unsold securities and growing
earnings if it does not sell. In addition, insufficient inventory in a channel can damage
commercial deals if subscribers stop applying.
Changes needed to reduce the risks/ Risk management:
Focus on seeing the end-to-end supply chain:
The difficult part about adaptable chains is that only supplier, organization, and customer
exercises are part of their sphere of influence. That is what is automatically omitted from the
situation from the manufacturers, consumers etc.
1. Simplify the inventory: Probably one of the most persuasive industries for agile chain starts
is to change inventory size so that it reacts quickly and restricts capital (Pu, Moyle, Jones and
Todorovic, 2019). To charge the store and stock while still remaining filled sufficiently to satisfy
the needs of the consumer, begin by using these methods from begin to finish:
 Reducing overall the section Plan's multilateral nature
 Effectively managing delivery times for the supplier
 Cooperation processes are adopted (for example JIT and VMI)
 reduce redundant channels from people
 Boost the management of tendering and submission.
2. Increase the buying cycle: Flexible risk-taking (and inevitably) costs that present serious
challenge for providers to pay. The effects on the income of remittance providers can be

capricious if we try to elongate the time to half the remittances (to make money as accessible as
expected).
In any case people can rearrange the quantity people have in the pocket by using the drawback,
an organizational knowledge and the probable limit on the first betting. In these areas of the
versatile chain, consider a position:
 Monitor agreement sustainability to limit the iteration faster than the conditions
established.
 Ways of registration and earning allocations for workflow.
 Creation of a supplier foundation to make contract exchange more profitable.
3. Advance Order to Money Circle
Depending on the time, increasing reliance and precision, the payment method is
variable. Finally, others have followed the practice to guarantee appropriate and effective care
before the person is planning behavioral counseling for a pastime (Marra, Lin and Clifford,
2019).
It is challenging to restrict this restriction to collection periods while ensuring a fast production
volume, accurate schedule and accuracy. In these small areas, try dividing ones method to see
where you can start shortening the amount of time:
 Submit payment forms instantly (speed and precision).
 Active in pursuit of intuitive and underlying discoveries.
 Value and the degree to which the different consumers are granted the payment terms.
CONCLUSION
The above-mentioned part of report should conclude that the organization’s records can
be revised such that stronger checks are implemented and market communication efficiency is
good. As well as report articulates that each flow chart helps to companies in order to make

suitable decision making. Similarly, effective separation of tasks inside a company will be
changed to discourage workplace animosity and robbery. Therefore, make clear
recommendations which depend on the creator's integrated COSO internal control system.

REFERENCES
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