Holmes Institute: Rainbow Illusion Case Study on Sales Control Systems

This case study analyzes Rainbow Illusion, a retail clothing chain, focusing on its sales control systems, transaction cycles, financial reporting, and management reporting. The assignment identifies six strengths in Rainbow Illusion's system, detailing how these strengths mitigate potential problems. It explores the situational pressures that could increase the likelihood of fraud within the company, referencing Cressey's fraud triangle. The report further discusses the advantages of a distributed computer system over a centralized one, highlighting its benefits in terms of speed, inherent distribution, and reliability. The analysis covers various transaction cycles including sales, purchasing, payroll, and financing, and how the company utilizes management reports to improve efficiency and decision-making. The case study also examines the role of internal controls and the security measures necessary to prevent computer fraud, aligning with the course objectives of understanding risks in computer-based systems and e-commerce, and the importance of ethical considerations.

Running head: RAINBOW ILLUSION
RAINBOW ILLUSION
Name of the student
Name of the University
Author Note

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Executive Summary
The current report has focused on identifying the six strengths in Rainbow Illusion’s system
for the control of sales transactions. The report also studies the possible problems been
avoided by Rainbow Illusion by the identified strengths in the system for the control of sales
transactions. The situational pressure in the company which can lead to the likelihood of
fraud in Rainbow Illusion is identified. The advantages of distributed computer system over
centralized is discussed and why the companies would like to choose it is discussed further in
the report.

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Table of Contents
Introduction................................................................................................................................3
Six strengths in Rainbow Illusion’s system...............................................................................3
Problems Avoided......................................................................................................................5
Situational pressures that increases fraud..................................................................................7
Distributed computer system over Centralized..........................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................11

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Introduction
The report aims to deal with the case study of Rainbow Illusion which is a store that
operates in New South Wales and Victoria which has 30-stores chain of clothes ready-made
for the females of young generation. The company utilizes some steps for controlling the
transaction of sales. In the organization every store is equipped with a manager who works
full time and an assistance manager. Part time workers consists of sales personnel and
cashiers which belongs to the young age line and are paid in hourly basis wages and also
commission are given on the basis of the sales. The aim of the report is to discuss the six
strengths in the sales control system of Rainbow Illusion. The problems that Rainbow Illusion
has prevented by each strength that is recognized by integrating power in the sales control
system is discussed. The situational pressures that would boost the probability of fraud in a
business of Rainbow Illusion is also been discussed.
Six strengths in Rainbow Illusion’s system
The strength of Rainbow Illusion’s system for controlling the sales transaction is that
it follows all the transaction cycle in accounting. The system also utilises the financial
reporting and management reporting system efficiently.
 Sales cycle- in sales cycle a command is acknowledged from a client to the company
and the order is then examined, shipped or service is provide to the buyer. The
statement is issued and the imbursement is collected (Johnston and Marshall, 2013).
To record every transaction Rainbow Illusion employees cash registers are used by

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the company which has four part sales invoices. These invoices of sales are used in
every kind of payment type like bankcard, cash or cheque.
 Purchasing cycle- in purchasing cycle the purchased order is issued by the company
to the supplier of goods, receives the goods and an record of account payable pays the
supplier (Levi, 2016). The employee number and transaction are manually been
recorded by the salesperson on the sales floor and the total of the invoices of the sales,
the calculation of discount when it is needed, the sales tax is calculated and the grand
total is prepared. The cashier then receives the invoice of sale from the salesperson
and one copy is retained in the sales book. The invoice is reviewed by the cashier and
the sale is input.
 Payroll cycle- the time of employees are recorded by the company and the hours and
overtime is verified, which intern calculates the gross pay, withholdings and deducts
taxes, and pay-checks are issued to employees. The invoice is then validated
mechanically by the cash register and a consecutive number gets assigned
automatically to the transaction. The cashier is hold responsible for the approval of
credit on charge sales and the sales done by cheque to get approved (Osadchy and
Akhmetshin, 2015). One copy of the invoice is given to customer by the cashier and
the other is kept as the copy of store and the third as the bankcard only if any deposit
is needed. In the reverse manner the returns are handled where the return slip is issued
by the cashier.
 Financing cycle- the debt is issued by the company to lenders and is followed by
interest payments and repayments of debt. By the end of every day the sales invoices
are ordered sequentially by the cashier and takes the cash register totals for bankcard,
cheque sales, cash and cash and credit card returns (Glasner, 2013). The assistant
manager reconciles the totals to the cash register tapes, the sales invoices total, and

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the return slips.
 Daily reconciliation report- is prepared by the assistant director for the evaluation of
store administrator. The day-to-day bank deposit is produced by the executive by
reviewing cheque, cash and credit card sales. The deposit is then made in bank by the
manager and the valid deposit slip is filed (Nobes, 2014). The sales invoices, return
slips and cash register tapes are forwarded every day at corporate headquarters to the
central data processing department for processing. A weekly activity report of sales
and commission is returned from the data processing department to the manager for
review.
 Management report- the management report is made to make the manager understand
about what is to be done. From all the department the data is recorded and provided as
a report thus giving the manager all the information of the sales (Williams and
Dobelman, 2017). The worth of business is seen for a specific period of time. An
insight can be produced through management reporting about the working of
company, the decision making empowerment and to find the accurate path for the
increase of operation efficiency.
Problems Avoided
The problems that Rainbow Illusion have avoided by implementing the transaction
cycle and management report are as follows:
 In sales cycle the corporation receives the command from the buyer. The cash
registers are equipped with four-parts of invoices thus it helps to lessen the problem
with the invoice and thus each transaction is recorded four times. The invoices does
not depends on the type of payment method thus making the transaction more
accurate and can help further in future if any issue arise for the invoice (Varley,

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2014). The sale person also records the transaction manually to the system and
generate the invoice on the basis of product and calculates the discount if available
and adds the tax and generates the invoice.
 In purchasing cycle the corporation issues an order to the dealer for the goods, and
gets the supply of the goods and the account payable is generated in accordance to it.
Thus a record is maintained (Miao and Evans, 2014). The invoices generated by the
salesperson is then reviewed by the cashier thus at every stage the checking is done
which makes it more accurate and the probability of problems gets decreased. The
invoices are also registered mechanically validated by the cashier and the number to
the transaction is assigned automatically.
 Payroll cycle- with the help of payroll cycle the working time, overtime and gross pay
of employees is recorded thus which leads to mitigate the problem of employee
mislead or any kind of employee dissatisfaction. Even the total of sales invoices and
the total of bankcard, cheque and cash sales and credit card is generated by the cashier
at the end of each day (Oliver and Anderson, 1994). The total report generated by the
cashier is reconciled by the assistant manager daily for the review of store’s manager.
Thus this system can avoid the problem related to the total cash flow of store of
Rainbow Illusion.
 Financing cycle- in financing cycle the debt is issued to the lenders and also the cash,
credit card and cheque sales is revised by the director and the daily bank security is
prepared. The deposit is made in bank by the manager and the deposit slip is
validated.
 Management report- management report is most crucial for the well-functioning of
the company. Rainbow Illusion equips the management report and the financial report
for the functioning of all the financial and management task in the organization

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(DRURY, 2013). The strategic metrics are measured to assess and monitor the
performance. The position of the company is also understood by the company. The
financial report is also maintained of the invoices and the total products sold on daily
basis thus there cannot arises as such issues.
Situational pressures that increases fraud
Donald Cressey, who developed a theory that said: "If three factors were met, any
normal, trusted individual would be able to engage in fraud." In other words, given the
correct scenario (or perhaps the incorrect situation), fraud could be committed. Not just
criminals, not just "unethical" individuals, and probably not just the accounting employees of
someone else’s business (Schuchter and Levi, 2016). Situational burdens on the corporate or
a private executive additionally could cause deceitful money coverage. Samples of these
situational burdens include: Sudden reductions in expenses or market share. One corporation
or a whole trade will expertise these reductions. Impractical budget pressures, significantly
for small results. These burdens could occur once a corporation at random controls profit
objectives and budgets while not taking actual circumstances into consideration. Financial
compression ensuing from bonus plans that hinge on short economic performance. This
pressure is especially severe once the additional benefit may be a significant factor of the
person’s total reimbursement. Opportunities for deceitful money coverage are gift once the
fraud is less complicated to commit and when detection is a smaller amount seemingly. Often
these chances arise from: The absence of a board of administrators or audit committee that
watchfully oversees the money coverage method (Lambsdorff, 2013). Weak or nonexistent
internal accounting controls. This example will occur, as an example, once a company’s
revenue system is overladen from a speedy growth of sales, a procurement of a replacement
division, or the entry into a replacement, unknown line of business.

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 Pressure- The first factor, pressure, suggests an individual may have an economic
issue that seems to be SECRET. And this economic issue threatens to steal their
standing among friends and family as a productive, upstanding and trusted individual
at job. Therefore, in any manner feasible, the individual may feel a profound need to
"fix" their economic issue (Wells, 2017). By doing so, any embarrassment induced by
their economic position can be avoided. Many people are struggling to pay the bills,
trying to maintain unrealistic lifestyles, or having addictions, but at all costs fraudsters
are trying to create or maintain a false image, and this pressure creates the first factor.
 Opportunity-The second factor of fraud is that an individual has a perceived chance or
method of committing the crime (Fisher, 2015). It is also critical that this technique
of fraud can be carried out without being caught (or so they hope). In other words, by
robbing a bank, a individual with the first factor–secret economic issues–will not keep
a secret very well.
 Rationalization – The third factor for fraud is rationalization or the self-justification of
the fraudsters that stealing is somehow OK (Rai, 2017). The typical fraudster is a
first-time offender, so they don't consider themselves a criminal, but a nice man in a
gigantic mess. Typical ways to justify their theft include: borrowing the money
(sometimes this is really the original intention) underpaid, and the extra money that
the family needs. The company won't miss it, they have lots of money. Other
employees are wasting money all over the place one cannot stand their boss, he / she
deserves it.
Distributed computer system over Centralized
Benefit of Distributed Systems over Centralized Ones:

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1. Speed- once accustomed device data processing wherever solely the goal is to attain
extreme speed on one downside. As compared to the centralized ones distributed systems are
able to do terribly high speed.
2. Inherent Distribution- is another excuse that builds a distributed system is that some
applications are fundamentally distributed. Banking, ordering are samples of the uses that are
inherently distribute (Wu, 2017). An advert distributed system is obtained, once every branch
of a bank are connected.
3. Reliability- Another possible benefit of a distributed system compared to centralized one is
the higher irresponsibleness. By allocating the employment over several machines, failure of
one chip can bring downcast at the maximum one machine, exploit the remainder integral.
Ideally, if five p.c of the machineries are downcast at any instant, then the system will still be
able to work with a five p.c loss in performance (Lucia-Palacios, et al. 2014). For essential
applications, like management of every store or a particular, employing a distributed system
to attain great irresponsibleness could also be a leading thought.
4. Progressive Growth. Progressive growth is additionally probably the giant and a
corporation can purchase a processer with the purpose of executing all the work on that. If the
corporate flourishes and therefore the employment raises, in a precise purpose the processer
cannot be satisfactory.
The only resolution is to substitute the processer with a bigger one, or if a second mainframe
is added. Each of those will effect management complications with the corporation's
processes (Helo, et al. 2014). In distinction, with the help of distributed system, it gets going
to be potential to easily to add additional processors to the structure, therefore permitting it to
enlarge bit by bit because the want arises.

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Conclusion
Given the report of the comparatively analysis of the different controlling transaction
of sales system adopted by Rainbow Illusion company above concludes that certain problems
which may affect the organization’s system for the sales transaction control are avoided.
Problems like authorization for purchase, the incorrect receipt shipment, the payments of
good is not received and errors in the paid amount is mitigated as at every stage of the sales
transaction a point to point report is generated by the employee of the organization.
Management report is also generated for more accurate, precise data driven decision. Some
situational pressures that may increase the chance of fraud is also discussed in the report
above which contains the factors like pressure, opportunity and rationalization in employee
that may lead the employee to do fraud with the company. The advantages of distributed
system over the centralized one is also discussed and why the companies should select the
distributed system instead of centralized. Thus by the report the clear concept of the sales
transaction system is delivered and how each strengths helps to avoid the problem in the
system is vividly described.

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References
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Fisher, K., 2015. The Psychology of Fraud: What Motivates Fraudsters to Commit
Crime?. Available at SSRN 2596825.
Glasner, D., 2013. Business cycles and depressions: An encyclopedia. Routledge.
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manufacturing execution system for distributed manufacturing. Computers in Industry, 65(4),
pp.646-656.
Johnston, M.W. and Marshall, G.W., 2013. Sales force management: Leadership, innovation,
technology. Routledge.
Lambsdorff, J.G., 2013. Corrupt intermediaries in international business transactions:
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Levi, M., 2016. The phantom capitalists: The organization and control of long-firm fraud.
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business implementation and performance: analysis of mediating factors. Internet
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Nobes, C., 2014. International classification of financial reporting. Routledge.
Oliver, R.L. and Anderson, E., 1994. An empirical test of the consequences of behavior-and