HI5019 Case Study: Analysis of Rainbow Illusion Sales Control System

This case study analyzes Rainbow Illusion's sales transaction control system, focusing on its strengths, weaknesses, and potential fraud risks. The report identifies six major strengths, including salaried managers, standardized systems across stores, separation of cash receipts from accounting records, supervision, segregation of duties, and sequentially ordered bills, which help the firm mitigate fraud. It also explores problems avoided by these strengths, such as incorrect commission allocations and difficulties in auditing. The study highlights situational pressures, such as revenue decline and financial pressures from bonus plans, that could increase fraud within the organization. The report concludes by advocating for a distributed computer system over a centralized one, explaining the benefits of such a system. This analysis provides valuable insights into effective sales transaction control and risk management strategies within a retail environment.

Running head: SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW
ILLUSION
SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW ILLUSION
Name of the Student:
Name of the University:
Author Note

1SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW ILLUSION
Executive Summery
This report is prepared to analyse the system of Rainbow Illusion for controlling the sales
transactions. The main objective of the report is to provide the information regarding the
system for controlling the sales transactions of the firm to the Chief Executive Officer of the
firm. This report identify the six major strength that the sales transaction controlling system
of the firm have and what problems the firm is able to avoid by these strengths of controlling
the sales transactions. Furthermore, report determine the two major pressure situation for the
firm which may increase the fraud within the organisation. Lastly, this report provides the
reason why the firms needs to choose the decentralised computer system rather than the
centralized system.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Strengths in Rainbow Illusion’s system.................................................................................3
Problems avoided by Rainbow Illusion’s system of controlling sales transactions...............5
Situational pressures that would increase fraud.....................................................................7
Reason for choosing distributed computer system.................................................................8
Conclusion................................................................................................................................10
References................................................................................................................................11

3SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW ILLUSION
Introduction
The report titled “System for Controlling Sales Transaction in Rainbow Illusion” is
prepared to analyse the system used by the Rainbow Illusion for controlling their sale
transactions. Rainbow Illusion is a retail chain firm based in the New South Wales and
Victoria. The firm have 30 outlet stores in total across the city. The main business of the firm
is to sale the ready to wear clothes for the young females.
The report is prepared to analyse the system used by the firm to control their sales
transactions. This report is prepared for the Chief Executive Officer of the Rainbow Illusion
to evaluate its processes, risks and internal control for its revenue cycle. To analyse the above
situation of the firm, this report try to identify the various aspects of the firm. The report
mainly analyse the existing system of controlling the sale transaction to identify the strengths
in Rainbow Illusion’s system for controlling sales transactions. Secondly, the report explains
what problems Rainbow Illusion has avoided by incorporating such strength in the system for
controlling the sales transactions. Further, the report also analyse those situations in which
the frauds would increase. Lastly, this report explains why any firm should choose to install a
distributed computer system rather than a centralised one by explaining the benefits of the
computer system.
Discussion
Strengths in Rainbow Illusion’s system
System for Controlling Sales Transaction is the system which is used by the firm to
control and record the selling transactions of the firm. There are various methods are
available for recording, reporting and controlling the selling process of the firm. As the time
changes the process or the system of controlling the sales is also evolved as well as the firms
also evaluate and change their system of controlling the sale transaction timely as per the

4SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW ILLUSION
requirement of the business. This system is specially used in such type of the business which
operates in the different places with the different selling points (Mackin 2015). As the firm
have various selling point in the different location hence this become difficult for the firm to
report the actual selling figure of each selling point by a single person. Therefore, firm need a
proper system to manage and control their sell.
By analysing the given case study of the Rainbow Illusion, the following are the
major six strength present in the system of controlling the sale of the firm: -
 Managers are salaried
The first and most important as well as the major strength in the system of controlling the
sale of the Rainbow Illusion is that the managers as well as the assistant managers of all the
30 stored are employed in the salary basis. Hence, all the mangers and the assistance
managers of the Rainbow Illusion are getting the fixed monthly salary for their contribution
towards the firm (McLaughlin and Lyon, LivingSocial Inc 2016). This is consider as the
strength of the controlling the sale system of the firm because it saves the firm from the
various frauds and malfunction which is will be discussed further in the report in details.
 Firm uses the same system for controlling sales transactions in all 30 stores
The second strength in the system of controlling the sale of the Rainbow Illusion is that
the firm uses the same system for controlling the sale in all its 30 stores. This helps the firm
in the various ways. For instance, this help the firm to prepare the combined report of all the
30 firm (Erenrich et al 2018). If firm follow the different system of controlling the sale then it
will be next to impossible to ascertain the sale details of all the 30 stores as whole because all
branch will have their own system and parameter to evaluating the sale.
 Cash receipts separate from accounting records

5SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW ILLUSION
The system of controlling the sale of the Rainbow Illusion have separated the cash receipt
from the accounting records of the sell. This is another strength in the system of controlling
the sale of the Rainbow Illusion. This helps the firm to double check the each and every
selling transaction of the firm to effectively manage and prepare their sales report.
 Supervision
The each store of Rainbow Illusion have three mangers, one manger and two assistance
manager to supervise the employees especially those employees who are related with the
selling process of the firm (Price 2016). This group of mangers in each store provides the
proper supervision to the employees hence this is another strength in the system of
controlling the sale of the Rainbow Illusion.
 The parting of cashiers and salespeople
The system of controlling the sale of the Rainbow Illusion also parted away the cashier
and the salespeople, not only that both also need to maintain their own and separate record of
the sell. This is another strength in the system of controlling the sale of the Rainbow Illusion
as this also helps the firm to cross verify the records of sell.
 The combined bills are one after the other ordered
Lastly, the system of controlling the sale of the Rainbow Illusion combined and records
the bills one after another in the prescribed manner along with the numbers. This system of
recording the bill is also a strength in the system of controlling the sale of the Rainbow
Illusion as this help the firm to maintain and track the occurrence of the sale.
Problems avoided by Rainbow Illusion’s system of controlling sales transactions
As discussed above the system of controlling the sale of the Rainbow Illusion have
several strengths. This strengths of the system of controlling the sale transaction of the

6SYSTEM FOR CONTROLLING SALES TRANSACTION IN RAINBOW ILLUSION
Rainbow Illusion helps the firm is various manners. This helps the firm to accurately evaluate
the sales of each store of all the 30 stores. This strengths of system of controlling the sale
transaction of the Rainbow Illusion also help the firm to identify as well as avoid any fraud
practices performed by the employees of the firm (Ayers and Odegaard 2017). The
followings points discuss the major problems avoided by the above mentioned strengths of
the system of controlling the sale transaction of the Rainbow Illusion: -
 Managers are salaried
The managers being salaried avoids the issues of incorrect commission allocations and
prevents inappropriate credit approvals. For example, a commission based manager may
approve a customer for credit even if they are not creditworthy to obtain a sale to boost their
commissions.
 Firm uses the same system for controlling sales transactions in all 30 stores
This strength avoids the difficulty in auditing each store. For example, if each store used a
different system for controlling sales transactions auditing each store would take intimate
knowledge of each system. This would be time-consuming and expensive.
 Cash receipts separate from accounting records
This strength prevents an employee from stealing a cash receipt or destroying it and
changing the accounting records. For example, if the store manager had access to both the
receipts and accounting records they could pocket the cash and change the records so that
there was no evidence of the sale (Spicer 2019). It would then be easy to write-off the
merchandise as theft by a customer.
 Supervision

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This strength allows for a smaller group of people to perform duties that would normally
be segregated. For example, this is a small group. It would be easy for the cashier and
salesperson to work together to perform a theft. However, with two different supervisors this
discourages dishonesty and prevents theft from going unnoticed.
 The parting of cashiers and salespeople
This strength of the system of controlling the sale transaction of the Rainbow Illusion
avoided the problem of the fraud performed by the salespeople or by the cashiers (Wells
2017). This system of requires that the both the salespersons and cashiers need to keep their
own records of sales, hence, this system reduces the chances of frauds normally performed by
the sales person and cashiers.
 The combined bills are one after the other ordered
Lastly, this strength of the system of controlling the sale transaction of the Rainbow
Illusion also reduces the chances of frauds performed by the cashiers. If the firm does not
implement this system in their controlling of sale transaction then cashiers can easily omit the
transaction of sales and put the entire money in their pockets.
Situational pressures that would increase fraud
There are various situational pressures that would increase the fraud in the firms like
Rainbow Illusion. The followings are the two major situational pressure for the firm which
may increase fraud within the firm: -
 A sudden decreases in the revenue or market share
A sudden decreases in the revenue or the market share of the firm results the increase
in the fraud within the organisation. This kind of pressure can be experience by the firm
or by the entire industry (Hess and Cottrell Jr 2016). In this situation, where the revenue

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of the firm decreases hence the firm does not the sufficient fund to distribute the salaries
to their employees timely. This motivates the employees of the firm to perform the fraud
in the duty and try to maintain their expenses by performing theft and other illegal
activities.
 Financial pressure resulting from the bonus plans
This is another pressure which can increase the fraud in the businesses like Rainbow
Illusion. Basically, the financial pressure arises from the bonus plans is depends on the
short term performance of the economy of the related country or the economy of the
entire world (Li et al 2017). This pressure mainly arises the frauds in the business when
the bonus is the important as well as the significant component of the employee’s salary.
In this situation, employer does not generate the enough profit to provide the bonus to
their employees. In the other hand, the employees have the high expectation of the bonus.
Hence, when employees does not received the bonus they start stealing the money from
the business by performing several frauds activities to meet their predetermined needs.
Reason for choosing distributed computer system
The computer system of controlling the sale transactions is the system of controlling
the sale of the firm by using the latest technology in the field of the computer. This is more
efficient and effective system of controlling the sale transactions of the firm. In today’s
developed world, most of the firm prefer this system to control their sales transactions
compare to the centralized system of controlling the sale (Troncoso et al 2017). There are
various benefits to use the computer system in the controlling process of the sale transactions
of the firm. To understand the reason for choosing the computer system to controlling the
sales transaction, firstly we need to understand the disadvantages of the centralized system of
controlling the sale and then the benefits of the computer system in controlling the sales

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transactions. Hence, the followings are the some major disadvantages of the centralized
system of controlling the sale transactions: -
 The decentralized system is highly dependent on the network connectivity hence the
system can fail if the nodes loses the connectivity because there is only one central
node (Jannesson et al 2016).
 There is the lack of the graceful degradation in this system which can causes to the
failure of the entire system.
 This system also have the less opportunity of data backup. If the system become
failure than there is less chances of recovering the data.
 Lastly, the maintenance of the centralized system is also difficult compare to the
decentralized system. As the centralized system is based on the single server hence
put down the server for maintenance is very difficult.
Now, the following are the some major advantages of decentralized system for the
business are follows: -
 The system have the minimum problem in respect to the performance in the
bottlenecks situation.
 This system has the high availability and always available for the work online.
 This system provides more automotive as well as control over the resources as
the each server controls its own behaviour (Imrie and Bednar 2016). Hence, this
system provides the better control over the resources.
The above discussed advantages of the decentralised system and disadvantages of the
centralised system are the main reason why the firm needs to choose the decentralised
computer system rather than the centralised one.

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Conclusion
Lastly, the paper conclude that the major six strengths of the system of controlling the
sales transactions of Rainbow Illusion are managers are salaried, all 30 stores of the firm
follow the same system, supervision, Cash receipts separate from accounting records, The
parting of cashiers and salespeople and the combined bills are one after the other ordered.
These strength of the firm helps the firm in avoiding the various problems. Further, the two
situation pressures which increases the chances of the fraud are the sudden decrease in the
profitability of the firm and the financial pressure arises due to bonus. Lastly, the various
disadvantages of centralised system as well as the various advantages of the decentralized
system are the main reason the firms needs to choose the decentralized computer system.

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References
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methods for analyzing performance of an entity. U.S. Patent 9,996,229.
Hess, M.F. and Cottrell Jr, J.H., 2016. Fraud risk management: A small business
perspective. Business Horizons, 59(1), pp.13-18.
Iacob, N.M. and Moise, M.L., 2015. Centralized vs. distributed databases. Case
study. Academic Journal of Economic Studies, 1(4), pp.119-130.
Imrie, P. and Bednar, P., 2016. End user effects of centralized data control. In Empowering
Organizations (pp. 213-225). Springer, Cham.
Jannesson, E., Nilsson, F. and Rapp, B., 2016. Strategy, control and competitive advantage.
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