(PDF) Strengths and Weaknesses of Global Information Systems

Added on - 21 Feb 2021

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CASESTUDY
Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY...................................................................................................................................3QUESTION 1...................................................................................................................................3Description of existing system and its weaknesses:-..............................................................3Suggestions for improving the system of Jertsy Ltd.:-...........................................................5QUESTION 2...................................................................................................................................8Main assertions of auditing and types of substantive procedure to cover the assertions andspecial risks............................................................................................................................8CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................15
INTRODUCTIONThe internal control is a process for assuring the company's goals and objectives inoperational efficiency and effectiveness, reliable financial reporting, and in compliance withregulations, laws and policies(Brusca, 2015). Auditing is done to examine and verify theefficiency of internal control systems and to determine the reliability and validity of information.This report includes the identification of existing accounting system that the Jertsy Ltd. isfollowing and it also determines the weaknesses of existing accounting system. This studyascertains the various suggestions for improvement in the present system of accounting toexpand the business of Jertsy Ltd. This report includes the audit assertions for the part of SS Ltdand the types of substantive procedures by the auditors in the context of SS Ltd. This study alsoexamines the impacts of raise in the amount of provision for warranty. The study analyses therisks involved in the increment of provisional amount of warranty for the company SweetSounds Ltd.MAIN BODYQUESTION 1Description of existing system and its weaknesses:In this study every store manages its operations with a degree of autonomy that means thestore manager have the freedom to decide the quantities and types of clothes that they prefer tobuy and sell. For this purpose, every store analyses the market conditions like latest demands,requirements and preferences of youth because after evaluating these demands and preferencesonly they will be able to satisfy these requirements which also help them to maximize theirrevenues. Even the Head Office of Jertsy Ltd. has delegated the authority of recruiting theemployees to all the stores, so the managers of stores can recruit their employees according totheir mindset and it is also specified that these stores recruit young employees as they can betterunderstand the demands of youngsters so it also helps them to earn better revenues(Ammar, AlShobaki and Abu-Naser, 2017).Since every store manages its own accounting records and submits returns to the HeadOffice, therefore it indicates that the Jertsy Ltd. is followingdecentralized accounting system.Decentralized Accounting System:This is an accounting system under which most of theaccounting functions are done by various divisions of enterprise(Busco and et.al., 2016). Underdecentralized accounting system, the accounting operations of Head Office consist of examining
the accounting records of these divisions, conveying instructions to the accounting employees orworkers and maintaining the accounting for centralized functions like consolidating the book-keeping of balances and reports(Chen and et.al., 2016).Since the Head Office has delegated its responsibilities to every store and so now thestores are eligible to take their own decisions and perform their functions as per theirperspectives. As there is no intervention of top management so it will help the stores in takingdecisions quickly. However, the Jertsy Ltd. has specified a standard mark-up on cost that everystore is required to consider in selling prices(Bemelmans-Videc, 2017).Generally, in Decentralized accounting system the management has to make various rulesand regulations regarding the authorities and responsibilities of every store as theseresponsibilities and authorities impact the operations and revenues of Jertsy Ltd. Apart from thatthere can be problems or issues in ascertaining where the authority of Head Office ends andmanagers of local stores starts(Furnham and Gunter, 2015). So the Jertsy Ltd. can face variousdifficulties while following Decentralized accounting system as this system has variousweaknessessuch as:Loss of Control:-Generally the higher management i.e. Head Office controls certainfields of operations but in this system the Head Office or top management delegates itsresponsibilities and authorities to the local stores that means the local stores areauthorized and responsible to take their own decisions which indicates that the HeadOffice does not have any control over the operations of the stores. This may lead to lossof profits or revenues of Jertsy Ltd because there may be probability of authority abuseand management in this system like the mangers of local stores can do misuse of theirauthorities or powers as the Head Office does not have an effective control over theoperations of the stores(Gustavson and Sundström, 2018).Local Viewpoint:-The managers of local stores make decisions according to theperformance of their stores. And sometimes it can be possible that the decisions taken bythese managers may not prove favorable for the company because the top managementand lower management may have different viewpoints which may lead to conflicts in thecompany. Since in this system every store takes their own decisions so it becomesdifficult to lead their goals and company's goal in one direction(Chen and et.al., 2016).
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