HI5019: Rainbow Illusion Case Study - Strategic Management and Systems

This case study evaluates the strategic management and information systems of Rainbow Illusion, focusing on its internal controls and risk management within its revenue cycle. The assessment identifies six key strengths in Rainbow Illusion's system for controlling sales transactions and explains how these strengths mitigate potential problems, such as missing items, transaction reconciliation issues, pilfering, bad debts, and skipped transactions. The analysis also explores two situational pressures that could increase the likelihood of fraud within the company, including manipulation of cash sales and product details. Furthermore, the report explains the rationale for choosing a distributed computer system over a centralized one. The document provides a comprehensive overview of Rainbow Illusion's operational strategies, highlighting the importance of robust internal controls and the impact of system design on fraud prevention and efficiency.

Running head: STRATEGIC MANAGEMENT AND INFORMATION SYSTEMS
Strategic Management and Information Systems
Name of the Student:
Name of the University:
Authors Note:

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Executive Summary:
The assessment evaluating the strength of Rainbow Illusions by evaluating and explaining
each problem that has been mitigated by the six identified strengths. Further explanation on
the each problems faced by Rainbow Illusions are mainly depicted. Thus, the adoption of the
strengths has mainly allowed the organisation to avoid the overall problems in their sales
transactions. The situation pressures also indicated, which states the possibility of fraud that
could be conducted by individuals on daily basis. Moreover, the significance of distributed
computer system has also been explained by highlighting its implication, which might help in
mitigating frauds and improve the cost saving mechanism of the organisation.

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Table of Contents
Introduction:...............................................................................................................................3
Identifying the six strengths in Rainbow Illusion’s system for controlling sales transactions:. 3
Explaining what problem(s) Rainbow Illusion has avoided by incorporating the strength in
the system for controlling sales transactions:.............................................................................5
Identifying the two situational pressures in a company like Rainbow Illusion that would
increase the likelihood of fraud:.................................................................................................8
Explaining why some companies would choose to install a distributed computer system rather
than a centralised one:................................................................................................................9
Conclusion:................................................................................................................................9
List of references and Bibliography:........................................................................................11

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Introduction:
The assessment aims in evaluating a report, which is provided to the Chief Executive
Officer of Rainbow Illusion for evaluating its processes, internal control and risk. Therefore,
relevant focus has been presented on detecting the internal controls for its revenue cycle by
evaluating and identifying the six strengths of Rainbow Illusion that are engrossed on
controlling sales transactions. Moreover, the analysis of the strength is further evaluated by
explaining each problem that has been mitigated by the six identified strengths. Further
explanation on the each problems faced by Rainbow Illusions are mainly depicted. Thus, the
adoption of the strengths has mainly allowed the organisation to avoid the overall problems in
their sales transactions. Further identification of two situational pressures are mainly
conducted for understanding the likelihood of frauds within the organisation. Lastly, relevant
explanation has been conducted to detect why some companies choose to install a distributed
computer system rather than a centralised one.
Identifying the six strengths in Rainbow Illusion’s system for controlling sales
transactions:
After evaluating the four-part sales invoices, its relevant strengths can be detected for
adequately controlling the sales transactions in each step. There are mainly six strengths in
the Rainbow Illusion’s system that allow the organisation to control the sales transactions.
The six strengths of Rainbow Illusion’s system are depicted as follows.
Dealings of the salesperson:
The main persons involved in the sales process is the salesperson, who manually
records all the relevant transactions with the sales involves. The information regarding the
clothes, class, description, quantity, and unit price needs to be inputted by the salesperson,

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while creating the sales invoice. This leverage that is provided to the salesperson is mainly
helpful in increasing the efficiency of the salespersons in recording all the relevant
information regarding the sales invoice. The salespersons are mainly paid on the basis of
commission on the sales, where the creation of the sales invoice for payment would be
conducted efficiently by providing all the relevant information regarding the calculation of
discount when appropriate, sales tax, and pre- pares the grand total (Robson 2015).
Salespersons containing transactions details:
The second-best strength of Rainbow Illusion’s system is the retention of relevant
details by the salesperson regarding the overall sales on the sales book. The action that is
taken by the salesperson for recording the relevant information in the sales book is further
fuelled by the other actions to help in comparing the actual payments with the sales books,
which reduces the occurrence of any misinterpretation and fraud. The maintenance of the
record by the salesperson in the sales book will ensure that organisation to get the actual
details of the sales, as relevant commission of the salesperson is linked with the sales
recording process.
Input of casher on every transaction:
The process of mechanically validating each transaction in the cash register by
another individual mainly helps in minimising the occurrence of repetitive information. In
addition, the cahier is also responsible for relevantly getting the credit approval on charge
sales, while approving sales paid through cheque. Therefore, the responsibility of the cashiers
is essential, as all the relevant credit approval and cash sales are recorded by the individual,
which helps in collecting the balance conducted after the creation of the sales invoices
(Moutinho and Vargas-Sanchez 2018).

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Dealings of the cashier:
The further dealings of the cashier are also beneficial for the organisation, as the
information gathered from the invoices is mainly collected and retained for each customer. In
addition, the second copy of the payment is kept for the store copy and the third copy
provides information for the bankcard. Thus, the process of the cashier is essential, as
relevant information is passed by the cashier to the different departments, such as sale
department, store department and finance department regarding the completion of the sales.
Increase in transparency:
The measures that is used by the sales person and the cahier mainly allows Rainbow
Illusion’s system to increase their efficiency and transparency in their financial records. This
information mainly helped in improving the flow of information from each department to
minimise the occurrence of any frauds. Therefore, the transparency in the recording keeping
would increase efficiency and reduce any misinterpretation of the accounts.
Tailing of the details:
Therefore, after the end of the day the cahier is responsible for sequentially analysing
the sales orders, cash register totals of the cash, bankcard, cheque sales. The last step of the
transaction recording is the relevant reconciliation of the accounts that is conducted by the
cahier for adequately matching all the relevant transactions in each book. This process would
ensure that all the relevant transactions have been recorded in lieu with the sales invoices and
cash balances (Ginter, Duncan and Swayne 2018).

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Explaining what problem(s) Rainbow Illusion has avoided by incorporating the
strength in the system for controlling sales transactions:
The benefits that was obtained by Rainbow Illusion is by mitigating the relevant
problems affecting their operations. There are relevant problems that was avoided by
Rainbow Illusions after incorporating the relevant strengths. These problems have been
depicted as follows.
Avoid the occurrence of missing items:
The utilisation of the salesperson in the filling all the relevant record of the
transactions or the invoice would mainly help the organisation to avoid the occurrence of
missing items. In addition, the main problem of the organisation was regarding the tracking
of missing items, which can be mitigated by using the salesperson, as the record keeper of all
the relevant invoices. The method is mainly appropriate, as the salesperson will diligently
input all their relevant information regarding the sales, as it is linked with their commissions
(Hill 2017).
Reconciling all the relevant transactions:
The process of the organisation also had problem in reconciling all the relevant
transactions that have been conducted during the financial year. The process of the
reconciliation is mainly conducted by allowing the salesperson to record the invoices and
keep a copy with the sales register to help detect any discrepancy in the sales register and the
actual payment that is being made by the buyer. This mainly helps in improving the process
of tracking where all the sales transactions are recorded or not in the actual sales register and
in other accounts.
Reduction in pilfering and employee theft:

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The other problems that was faced by Rainbow Illusions is the occurrence of pilfering
and employee theft, which might have negative impact on its revenue generation capability.
The use of cashier in the process of validating the invoices in the cash register mainly helps
in reducing the occurrence of employee theft that might be conducted to increase their
commission due to false sales invoices. Therefore, the presence of validation that is conduced
of each invoice are mainly helpful in reducing the occurrence of theft within the operations of
Rainbow Illusions (Schaltegger and Burritt 2017).
Reduction in the risk of bad debts:
The occurrence of the bad debt is one of the major risks, which can be faced by
Rainbow Illusions due to the non-payment of cheques. The process mainly appoints a cashier
who looks on to each and every transaction and recognise the party to which credit sales are
being conducted. This approval process mainly helps in reducing the occurrence of any future
bad debts that might be conducted on the similar individuals coming for the purchase. Hence,
the problems of bad debt are mainly reduced by the overall credit approval system.
Tracking of bankcard transactions:
Moreover, the tracking process of the bankcard transactions could also be a problem
that might have negative impact on the revenue generation capability of Rainbow Illusions.
Hence, the presence of tracking process that is conducted by the cashier would eventually
help in portraying 2 copies of the invoices, which will be recorded as store copy and
bankcard. Thus, the information might help in tracking all the bankcards transactions that
have been conducted and understand the level of balance that have been accumulated.
Reduction in any skipped transactions:

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The occurrence of skipped transaction is one of the major problems that is conducted
for retail companies such as Rainbow Illusions. Therefore, the presence of evening tallying
that is conducted by the cashier would eventually help in minimising the occurrence of
mismatch between the sales register and the cash register and help-out in finding any
transactions that have been skipped while maintaining the records (Trigo, Belfo and
Estébanez 2016).
Identifying the two situational pressures in a company like Rainbow Illusion that would
increase the likelihood of fraud:
The occurrence of situational pressure can be conducted by employee terminating
certain actions and creating frauds. Therefore, occurrence of two situational pressures in the
company like Rainbow Illusions are depicted as follows.
Case 1: The manipulation in the cash sales can be conducted if both the salesperson and the
cashier is involved in the avoidance of relevant entry of any truncations in the sales register
and cash register. The combined effort of both the salesperson and the cashier would be
catastrophic for the organisation, as only the sales conducted through cheques will be
detected and all the cash payment would be distributed between the salesperson and the
cashier. Therefore, there is a possibility of relevant manipulations that might lead to a huge
loss for the organisation and can be treated as a situational pressure for Rainbow Illusion.
Therefore, the situational pressure would directly increase the level of fraud within the
organisation, where certain measures need to be conducted for allowing the frauds (Lasserre
2017).
Case 2: The second situational condition that might occur is the manipulation of the product
details, which is the responsibility of the salesperson. The manipulations of the product
details in the invoice would directly lead to incorrect preparation of the relevant documents

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and hamper the actual record entries. This manipulation would directly result in the creating a
fraudulent chance, where customer would be paying higher money, while record will be
conducted for lower prices. This will negatively impact the sale revenue and invoice billing
of the organisation.
Explaining why some companies would choose to install a distributed computer system
rather than a centralised one:
Some of the companies would mainly choose to install a distributed computer system
for effectively reducing the occurrence of manipulations or error in recording the
transactions. The centralised computer system will mainly require the one individual to
reduce all the relevant transactions at the end of the date by reviewing the overall journals
and invoices. Therefore, the presence of the centralised measures would increase the level of
problem and might also lead to the manipulation and frauds. Hence, the adoption of the
distributed computer system would eventually help in mitigating the recording process of
each transactions through one individual (Quinn and Strauss 2017).
The presence of a distributed computer system would mainly allow entry of the
product details to be recorded directly by the salesperson. This would mainly reduce the
occurrence of further transfer of details to sales or cash register, as the distributed computer
system would eventually help in determining all the transactions directly though the one
system, where all the relevant details would be present. Therefore, the presence of the
distributed computer system will also ease the process of reconciliation and increase the cost
cutting measures, as the presence of the employees will be reduced.

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Conclusion:
The assessment aims in evaluating the strengths of Rainbow Illusion’s system, which
has been used by the management for mitigating the overall risk involved in daily
transactions. The analysis of the relevant strength has been conducted by identifying the
problems that is mitigated by the identified strengths. Rainbow Illusion is mainly able to
reduce the level of manipulations and frauds in their operations, which could have been
conducted due the absence of the identified strengths. The situation pressures also indicated,
which states the possibility of fraud that could be conducted by individuals on daily basis.
Moreover, the significance of distributed computer system has also been explained by
highlighting its implication, which might help in mitigating frauds and improve the cost
saving mechanism of the organisation.

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List of references and Bibliography:
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Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.

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