Evaluation of Process, Risks and Internal Controls

This report evaluates the process, risks, and internal controls in a retail business. It discusses the strengths and problems avoided by Rainbow Illusion's system. It also explores situational pressures like employee fraud and refund fraud. The significance of distributed computer systems is also discussed. Read more on Desklib.

Running head: EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
Evaluation of process, risks and internal controls
Name of the University
Name of the Student
Authors Note

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EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
Executive Summary
Management of the existing processes, risks and internal controls are very much
significant in order to maintain transparency in the revenue cycles for any commercial
establishments. The organizational growth can be maintained in the first place if the
current processes are evaluated in a frequent manner. The identified risks should also be
addressed in the first place so that the growth of a retail business is maintained. The
significance of evaluating the internal controls in retail business shall be evaluated in this
report in an organized manner. This report shall be having numerous segments and each
of these segments can be very much beneficial to maintain growth in the revenue cycle in
this retail business.

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EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
Table of Contents
1. Introduction........................................................................................................................3
2. Identification of the six strength of Rainbow Illusion’s system..........................................3
3. Problems avoided by each of the identified strengths.......................................................4
4. Identification of situational pressure in Rainbow Illusion...................................................5
Situation pressure 1: Employee fraud................................................................................5
Situation pressure 2: Refund fraud....................................................................................6
5. Significance of distributed computer systems...................................................................6
6. Conclusion.........................................................................................................................6
7. Reference...........................................................................................................................8

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EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
1. Introduction
This report is for the Chief Executive Officer of Rainbow Illusion and it will evaluate
the process which are used to control the sales transactions, risks and internal controls.
Six strength of sales transaction procedure of this retail shall be discussed in a detailed
manner in this report followed by problems which are addressed due to the incorporation
of the changes (Zhu et al. 2016). This report shall also discuss two situational pressures
which might increase the changes of fraudulent activities. The effectiveness of the
distributed computer system over the centralized systems in retail industry has also be
discussed in the concluding sections of this report.
2. Identification of the six strength of Rainbow Illusion’s system
The notable strength of the system are listed as followings:
Payment options: The wide range of payment category like bankcard, cheque and
cash is one of the main benefits of this system maintained by Rainbow Illusion is one of
their prime strengths as it allows the consumers to choose the payment model according
to their wish and necessities (Youngblood 2016). This strength can be very much
beneficial in this business to attract the potential consumers of this organization. Overhead
costs of the business can also be minimised using these payment options as well. The
current consumers of this organization can also be retained in the first place using different
payment options (Weetman 2019). Enhancement of the business sales can also be one of
the other contribution of maintaining different payment systems.
Security of the internal control: The procedure maintained by the sales person
and the cashier as they have a copy of each of the sales invoice. This is very much
beneficial to maintain security to both the consumer transaction as well as financial
stability for the top level management team of Rainbow Illusion. The security of the diverse
categories of invoices associated with this business such as timesheet invoice and
recurring invoice (Cuylen, Kosch and Breitner 2016). Thus, this strength can be very much
useful to provide financial stability to the stakeholders of this business.
Assessment of Invoice: Comparative analysis and revaluation of the invoice and
inputtinf of the sales by the cashier is one of the other positive associated with the sales
transaction procedure of Rainbow Illusion. The invoice coming from the vendors are one of
the most significant financial statement of this business which can be verified by the
assessment of the invoice. This assessment procedure can be very much useful to
manage the sales order as well as the purchase order of this business. The loyal buyers of
this business can also be identified in the first place as a result of the re-assessment of the
invoices (Wang, Sanchez Rodrigues and Evans 2015). Thus, the balance sheet of this
organization can be maintained in a transparent manner using this strength.
Mechanical validation of invoice: Different categories of discrepancies
associated with the invoice of the transaction is the other advantage of the sales
transaction procedure maintained in Rainbow Illusion. The rates of the service delivered by
this commercial organization can be verified and re-evaluated using the mechanical
validation procedures as well (Amasiatu and Shah 2018). The mechanical procedure can
be very much useful to maintain a good relation among the different stakeholders of
Rainbow Illusion like the suppliers, supplier of the raw materials and service providers. The
charge sales and the approval sales can also be monitored in an organized manner using
this mechanical validation procedure. Thus, transparency of this business can be
successfully maintained using the mechanical validation procedure adopted in this
organization.

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Sequential arrangement of the sales invoices: Each of the sales invoices are
arranged in a sequential arrangement in this organization. The entire proceedings along
with the procedure of invoicing can be checked and the previous transactions can be
monitored using this sequential arrangement procedure as well (Abadi et al. 2016).
Preferences of the customers of this organization can be understood using this sequential
arrangement of the sales invoices. Transparency in the accounts department of this
organization is very much desired in order to maintain the business growth of this
organization and it is possible it each of the sales invoices are range in a specific
sequential order.
Creation of daily reconciliation report: It is one of the prime strength of the sales
transaction process of Rainbow Illusion. The entire transaction procedures can be checked
and reviewed by each of the concerned stakeholders of this business using the daily
reconciliation report (Speights, Downs and Raz 2017). This report is very much useful to
detect the errors as well as the inconsistencies associated with this each of the business
transactions of the business. Thus, it can be said that the sales transaction of this
business is maintained successfully using the daily reconciliation report which is one of the
notable strength of this organization.
3. Problems avoided by each of the identified strengths
Payment options: Preference of the consumers shall be violated if there are very
low payment mode available in this business. Huge amount of time shall also be wasted to
review each of the invoices. The other significant issue associated with this business
which can be avoided successfully by having more than one payment mode is
categorization of the paid bill and the unpaid bill. The payment options are one of the
prime success factors in most of the retail corporations all over the world and it is very
important to have flexibility in the payment options (Shah and Amasiatu 2018). Reliability
of each of the invoices can be maintained if there are more than one payment systems
associated with the business as there are lots of critical business conditions which have a
direct effect on the business transactions like recession and inflation. New business
partners can also be identified in the first place using different payment modes. Thus, it
can be said that retaining the current consumers is one of the prime issues of this
organization which was addressed using the different payment options.
Security of the internal control: Confusion in monitoring each of the sales invoice
was one of the prime concerns associated with this retail business. Maintaining a security
of control is very much desired in this business there are connected with numerous
subsidiary organizations in both Victoria and New South Wales. The monitoring of the
sales receipts is a huge challenge for the cashier of this organization and this problem was
sorted as salesperson of this business manually sets the records and the business
transactions (Olafsson and Pagel 2018). The calculation of the discount rate is the other
concern associated with this business and the secured procedure which are maintained by
casher and the salesperson of this organization is very much useful to set the discount
rates for the consumers of this organization. Calculation of the sales tax was the other
difficulty faced by this organization which can be addressed using the work place ethics
maintained by both the cashiers and salesperson. Thus, it can be said that the errors in
managing the sales invoices is successfully addressed using this identified strength of this
business.
Assessment of Invoice: The entire consumer reach of the organization can be
maintained using this strength of this organization. This strength was very much useful to
deal with the errors in invoices made for the items and inventories. The entire business
condition and the business scenarios which might have a direct impact on the growth rate
of this organization can be eliminated in the first place using this identified strength

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EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
(Noriega et al. 2018). This strength was very much useful to sum up the invoice totals
which was a huge challenge for the cashier of this organization as raw data keeps on
coming from different branches of this business of New South Wales and Victoria.
Mechanical validation of invoice: Different categories of discrepancies associated
with the each of the invoices using the mechanical validation processes. Sending and
receiving of the invoices is one of the biggest challenges faced by this retail organization
which are successfully addressed using the mechanical validation procedure (Anitsal,
Moon and Anitsal 2015). Responsibility of each of the branch managers and other third
parties associated with this retail business can be managed in an organized manner using
the mechanical validation procedure. This strength is very much useful to deal with false
payments which might have a direct negative impact in the growth rate of this retails
business as well.
Sequential arrangement of the sales invoices: Sending invoices to wrong
consumers can also be one of the other risk associated with the sales transactions of this
organization. The sequential arrangement of the sakes invoices can be very much
significant to manage the itemized products which are there for the adult women. Thus,
understanding the needs and expectation of the young females is a huge concern in this
retail organization. The sequential arrangements of the invoices can be very much
beneficial to manage each of the invoices by both the sales person as well as the cashier
of this retail organization. The evaluation procedure of the managers can also be
significantly affected due to the sequential arrangement of the sales invoices (Ngo and
Nguyen 2016). Even the difficulties of the assistant managers who prepares the daily
reconciliation report can be significantly affected due to the sequential arrangement of the
sales invoices. Thus, the issue of fogginess in maintaining the sales invoices can be
addressed in an organized manner using this identified strength.
Creation of daily reconciliation report: The irregularities of the transaction
procedure which might have an impact on the long term growth of this organization can be
identified using this report as well. It can also be said that interest tracking and receivables
tracking are the other benefits of having daily reconciliation report (Bhatkar 2017).
Transaction status updates can also be managed in the first place using this daily
reconciliation report as well. Thus, it can be said that maintaining transparency in
managing the sales transactions can be addressed with this identified strength.
4. Identification of situational pressure in Rainbow Illusion
Situation pressure 1: Employee fraud
There are diverse categories of stakeholders which are associated with the retail
corporations all over the world. The stakeholders of the retail business includes the
customers, suppliers, market competitors, government officials, service providers,
employees, managers, assistant managers, cashiers, community and activists. Since this
is one of the biggest retail corporation in Australia this organization is trying to enhance
their business reach outside New South Wales and Victoria so there will be an increase in
customers as well as employers of this organization in the coming years (Lichtenberg
2016). Threats coming from inside this retail corporation can have a significant impact on
the business reputation of this organization. At the same time, it can also be said that the
likeliness of the frauds increases on a parallel manner with the increase in the strength of
the workers.
The loyal consumers of the retail industry are generally provided with gift cards and
loyalty bonuses and the increase in the strength of employees can have a significant
impact on these facilities (Kasemsap 2018). Gift scams most occurs mostly from the inside

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EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
in this organization and the online traffic this retail corporation can be effected as a result
of this fraudulent activity coming from the employees of this organization.
The employees working in this retail corporation can also provide the products of
this organization to their friends and relatives in cheaper rates which is also considered as
a major fraudulent activity coming from the employees of this organization.
Situation pressure 2: Refund fraud
The items which are returned from the younger female consumers of this
commercial establishment have the maximum chances of fraudulent activities. Returning
of the stolen products also falls under this category as well. The concept of counterfeit
receipts which are directly associated with the retail fraud.
The false return of merchandise by the consumers based on false reviews can be
one of the major fraudulent activities of this retail industry. Huge amount of financial
resources can be lost during this fraudulent activities (Finkler, Smith and Calabrese 2018).
These fraudulent activities occurs mainly due to the flexibility offered to the consumers of
this business to maintain a good market reputation. False refunds based on the gift card
provided by this retail industry is the other area which can increase the likelihood of the
fraudulent activities.
False cash returns are the other fraudulent activities are associated with the
employees working in this retail industry. Along with that, it can also be said that there can
be few consumers who might be responsible for fraudulent activities of the credit cards
(Fernie and Sparks 2018). This fraudulent activity is directly associated with business
reputation of this retail organization. This kind of fraudulent activities might occur in this
organization in the coming time for which effective fraud detection measures should be
deployed in this retail organization as well.
5. Significance of distributed computer systems
The distributed computer systems which are deployed in the retail industry have
numerous positives as compared with the centralized systems (Bulman et al. 2018). The
prime significance regarding the deployment of the distributed systems are discussed in
this section of this report.
 Growth: Incremental growth can be observed in each of the department of this industry
such as the sales and marketing and it also have an impact on the decision making
procedures.
 Reliability: The reliability of the distributed computer systems are much more than the
centralized systems as any sort of malfunction in the systems will not pause or stop the
entire system.
 Computing Power: The computing power of the distributed computer systems are much
better than the centralized systems which can be very much useful in retail industry.
 Openness: There are diverse categories of systems which are deployed in the retail industry
such as the Management Information System. Distributed computer systems can
communicate very easily with the different systems such as MIS (Demirguc-Kunt, Klapper
and Singer 2017). Microprocessors can be added in the distribution system in order to
enhance the pricing strategy of this business.
6. Conclusion
This report helps in concluding six different categories of strengths of the sales
transaction process associated with this retail business such as their different options to
accept payment from their consumers, security of the internal controls as the scope of
each invoices are kept by each of the stakeholders, assessment of the invoices,

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EVALUATION OF PROCESS, RISKS AND INTERNAL CONTROLS
mechanical validation of the invoices, sequential arrangement of the sale invoices and
creation of the daily reconciliation report by the assistant manager of each branches. The
problems which are addressed from these identified strengths are retaining the current
consumers using the different payment options, management of the errors invoices using
the internal control, managing the sum up control using the assessment of the invoices,
dealing with false payment using the mechanical validation of the invoices, issue of
fogginess which are addressed using sequential arrangement, maintaining transparency of
business among each of the stakeholder using the daily reconciliation report. This report
also identifies two situational awareness which increases the likelihood of fraudulent
activities coming from both the employee and consumers in the retail business. This report
have also determined the significance of distributed computer systems as compared with
the centralized systems in terms of the enhanced incremental growth, reliability and
computing power.

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7. Reference
Abadi, M., Agarwal, A., Barham, P., Brevdo, E., Chen, Z., Citro, C., Corrado, G.S., Davis,
A., Dean, J., Devin, M. and Ghemawat, S., 2016. Tensorflow: Large-scale machine
learning on heterogeneous distributed systems. arXiv preprint arXiv:1603.04467.
Amasiatu, C.V. and Shah, M.H., 2018. First party fraud management: framework for the
retail industry. International Journal of Retail & Distribution Management, 46(4), pp.350-
363.
Anitsal, I., Moon, M.A. and Anitsal, M.M., 2015. Technology-Based Self-Service: Issues
For Retail Management and Research. In Proceedings of the 2002 Academy of Marketing
Science (AMS) Annual Conference (pp. 25-36). Springer, Cham.
Bhatkar, V., 2017. Distributed Computer Control Systems in Industrial Automation.
Routledge.
Bulman, R.G. and Blum, S.R., ALTISOURCE S. À RL, 2018. Expense tracking, electronic
ordering, invoice presentment, and payment system and method. U.S. Patent Application
15/817,853.
Cuylen, A., Kosch, L. and Breitner, M.H., 2016. Development of a maturity model for
electronic invoice processes. Electronic markets, 26(2), pp.115-127.
Demirguc-Kunt, A., Klapper, L. and Singer, D., 2017. Financial inclusion and inclusive
growth: A review of recent empirical evidence. The World Bank.
Fernie, J. and Sparks, L. eds., 2018. Logistics and retail management: emerging issues
and new challenges in the retail supply chain. Kogan page publishers.
Finkler, S.A., Smith, D.L. and Calabrese, T.D., 2018. Financial management for public,
health, and not-for-profit organizations. CQ Press.
Kasemsap, K., 2018. Retail management and electronic retailing. In Supply chain
management strategies and risk assessment in retail environments (pp. 139-158). IGI
Global.
Lichtenberg, P.A., 2016. Financial exploitation, financial capacity, and Alzheimer’s
disease. American Psychologist, 71(4), p.312.
Ngo, V.M. and Nguyen, H.H., 2016. The relationship between service quality, customer
satisfaction and customer loyalty: An investigation in Vietnamese retail banking sector.
Journal of Competitiveness.
Noriega, N., Taylor, J., Tello Chinga, C.D. and Vite Hidalgo, R., 2018. El vendor invoice
management y la gestión de cuentas por pagar de la empresa Rash Perú SAC en el
periodo 2016-2017.
Olafsson, A. and Pagel, M., 2018. The liquid hand-to-mouth: Evidence from personal
finance management software. The Review of Financial Studies, 31(11), pp.4398-4446.
Shah, M. and Amasiatu, C.V., 2018. First Party fraud management: A framework for the
retails industry. International Journal of Retail & Distribution Management, 46(4), pp.350-
363.
Speights, D.B., Downs, D.M. and Raz, A., 2017. Essentials of Modeling and Analytics:
Retail Risk Management and Asset Protection. Routledge.

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Wang, Y., Sanchez Rodrigues, V. and Evans, L., 2015. The use of ICT in road freight
transport for CO2 reduction–an exploratory study of UK’s grocery retail industry. The
International Journal of Logistics Management, 26(1), pp.2-29.
Weetman, P., 2019. Financial and management accounting. Pearson UK.
Youngblood, J.R., 2016. Business Theft and Fraud: Detection and Prevention. CRC Press.
Zhu, J., He, H.J., Tang, J. and Yan, H.Z., 2016, October. Tax-control network invoice
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