Final Project AAT Essay Example for Free

Final Project AAT Essay1.TERMS OF REFERENCE1.1The cogitation has been prep atomic result 18d to c everywhere the requirements of the AAT whole Internal Control and score Systems.1.2The objectives of the report atomic number 18 to analyse the accountancy function at signstand Ltd and to identify whatsoever(prenominal) failinges, so that recomm ratiocinationations for the implementation of a fresh and breakd system drive come out of the closet be castigate in fundament, in enjoin to derogate errors and to dis exclusivelyow machination.2. EXECUTIVE SUMMARY2.1The aim of the report is to analyse and evaluate the current intimate confine system and accounts receiv fit ledger of inkstand Ltd. 2.2The findings of the probe mettlesomelighted the streame flunkes The Retail shops riding habit complete information processing systems which atomic number 18 non connected to the ne dickensrk. Lack of security measures put in place to safeguard the sensitive perso nal data held on individuals, and non-compliance with the entropy tri scarcee of 1998. Non-compliance with confederation constitution, as up eras however carried out once per mean solar solar daylight. Data preoccupied due(p) to infrequent back-ups argon pricy in dickens magazine and specie. The retail shops befool a sloppy approach to exchange worldagement. exchange only banked doubly per week. The union does non produce or provide all appriseion and befri residuum guides, which implementees brush aside refer to in monastic assure to find supporter and advice. The federation do non overhear contingencies in place for rung absences due to illness or annual leave behind There is no encouragement for employees to attend grooming courses. Passwords single-valued functiond atomic number 18 non sufficient to maintain an adequate direct of security. The friendship uses a just in fourth dimension system of production, and any unforeseen upholds in s peech communication sack up realise delays and whitethorn pitch an jounce on the federations reputation. There atomic number 18 insufficient control and monitoring procedures carried out by superior personnel. The companionship on the whole told toldows nodes to pay by draw off.The club does not conduct per figure of speechance appraisals.The order does not conduct reparation mental faculty referings.Management not upholding ethics and integrity, and not practicing their let policies thus creating an ideal environment for imposture and unhonorable entrusts to be bankted. round shortages contri onlying to processing delays of gross revenue invoices.2.3Suggestions and recommendations consent been do to help direct improvements which drop by the wayside process up the associations performance and efficiency and to helpcreate anti-fraud environment.3. METHODOLOGY3.1The research conducted to create this report was primarily obtained from data provided fro m the AAT website, the Internet, and reference textbooks.3.2A flow of four months was taken to monitor the Internal Controls system and Accounts due Ledger to gather sufficient data in order to compile the report.3.3A meeting was consistent with inkwells finance handler and society Accountant to discuss the aras of concern and the procedures that needed to be implemented to make satisfactory improvements.4. INTRODUCTION4.1 inkstand Ltd is a large private limited play a farseeing at heart the private sector, supplying a complete range of re-manufactured inkjet and laser toner cartridges to its customers. Products disregard be bargain ford from all the phoners sixty nationwide chain of high street shops, which argon situated in most of the UK cities and large towns, or from their on-line shop facility which is accessible twenty-four hours alwaysy day of the week.4.2The fraternity is run by three directors who be the main decision makers. Inkwell Ltd was created seven o ld age ago by two of the directors, Mr Paul Farnon (Managing Director) and Ms Victoria Dawson (Sales Director). Mr Anil Gupta (finance Director) joined Inkwell subsequently put in the come with two old age ago. The confederation shares are owned by internal stakeholders only. deoxycytidine monophosphate% of the shares are split amongst the directors, with the Managing Director existence the majority shareholder with holdings of 40% and the some another(prenominal) directors all(prenominal) holding 30% of the shares.4.3Their head office is situated in an industrial estate, establish in Birmingham, where the management team, accounts part, on-line shop and large central warehouse are all located. The political party has to a greater extent and much grown since it was initially set up and currently employs one hundred and eighty regular employees, and has inform revenue of over sixteen million pounds. .4.4Inkwell has a mission to become environmentally social and prom otes this by ensuring that they continue to strive towards achieving a greener environmental future, without jeopardising or comprising the tonus of their products and reputation. The familiarity run acrosss that products meet with snow% quality satisfaction guarantee, and has make a promise that should current conditions not be fulfilled that the partnerships polity of replacing the products without rejection, will be adhered to without affecting the customers statutory rights. The confederation assures their customers that the recycled cartridges, which are cheaper than the genuine, original products by up to 20%, will meet or exceed the quality of the original cartridges.4.580% of Inkwells gross gross sales are sign ond by non- handicraft customers. Trade customers represent the stay 20%, and these customers are supplied goods on assign terms of between thirty to sixty days.4.6The Finance Director, who owns 30% of the companions shares and reports immediately to th e Managing Director, is qualified to BSc and FCMA standards, and has worked for the Inkwell Ltd for five years on a full-time basis. This Director is entrusted to ensure that all the monetary strategies, support the aims of the business and to identify opportunities in order to get greater efficiency and court savings, as well as driving sustainable and amplificationable exploitation and optimising profit capacity and shareholder value4.7The alliance Accountant, who reports directly to the Financial Director, is AAT and ACCA qualified and has worked for Inkwell Ltd for seven years on a full-time basis. The Accountant complies, analyses and produces the guilds quarterly and annual financial lines4.8The Accounting Technician, who reports directly to the Company Accountant, has worked for Inkwell Ltd for six months on a full-time basis. This employee possesses relevant experience besides does not currently demand any accountancy qualifications. However, the Technician is cu rrently studying for the AAT qualification, with the aim of passing the exams deep down the ascertaining year.4.9The General Ledger Clerk, who reports directly to the Company Accountant, has worked for Inkwell Ltd for four years on a full-time basis. This employees principal responsibilities are to input financial data into the computer system, in order to produce monthly trial balances. This clerk does not possess any accountancy qualifications.4.10The Accounts Payable Clerk, who reports directly to the Company Accountant, has worked for Inkwell Ltd for three years on a part-time basis, and already holds a aim two AAT qualification, but has expressed an interest in progressing on to the next level.4.11The Accounts Receivable Clerk, who reports directly to the Company Accountant, has worked for Inkwell Ltd for three years on a part-time basis. This clerk has worked previously inside the accountancy industry, but does not currently possess any relevant qualifications.4.12The Costi ng Technician, who reports directly to the Company Accountant, is passing experienced and competent within this role and has worked for Inkwell Ltd for seven years on a full-time basis. This employee does not currently possess any relevant qualifications and has expressed their reluctance and unwillingness to participate on any training activities4.13The Payroll Clerk, who reports to the Company Accountant, possesses a level two AAT Accounting qualification, and is enthusiastic to a greater extent or less progressing pull ahead. This employee has worked for Inkwell Ltd for four months on a full-time basis, and has very limited experience of workings within a payroll department.5.REVIEW OF THE ACCOUNTS SYSTEM5.1Inkwells policy for their large business customers is generally to trade on a specie-with-order basis for the initial three months of custom, and uses the services of a doctrine reference confidence which conducts the necessary credit checks. The Accounts Receivable Cler k is responsible for carrying out the credit checking procedures, and after liaising with the Sales Director regarding accounts which require a credit limit of more(prenominal) than 1,000 per month, recommends suitable credit terms.This is a saturation of the accounting system in that by victimization the credit reference business office it will determine the ability of new customers to pay their debts. This will observe fraud in that customers would not be able to purchase goods wittingly that they could not afford to pay for them, so change magnitude bullion flow. This will overly beget an stupor on the integrity of the customer. However the weakness should be that a full limit should be set, in that the customer is not allowed to go over a total limit, otherwise the customer could do four or five months trading up to 5,000 and this would escalate further if they were non payers, meaning the debts are more kindredly to go bad. This would waste an tinge on the cash flow of the business.5.2All new credit limits and changes to existing limits of more 5,000 per month, have to be approved by the Financial Director. Risk management is natural for a callers survival and success. This is a strength in the association as any increase in limits have to be classic by a senior piece of the pay team. This will reduce the danger of fraud, in that no individual has control over the customer accounts, and force out extend limits for customers for their own personal gain.5.3A potential customer may want to greet the harm of the goods before deciding whether to proceed with a proposed transaction, and will request a quote either by phone, email or in writing. As a means of preventing fraud, due to either party contesting the quotes tending(p), the orders preferred regularity of issuing these quotes is by email. Written quotes are supplied on a customers request, however, Inkwell likes keep this method of issuance to a minimum, as composing usage has an impact on the environment and goes against the beliefs of the federation.Inkwell, in any case prefer not to give a quote over the phone, as a record merchantmannot be kept regarding the quote given, and there would be no written manifest to support against any disputes that may arise in the future. Before proceeding with the order a customer faeces make comparisons between the prices given by different suppliers. If the customer accepts the price given by Inkwell, and proceeds with the order, the price quoted is fixed and cannot be changed, which is contrary to that of an estimate world given. This has an effect on the ethical principle of objectivity, in other words the customer would be free from biased.5.4 erstwhile an order is effortfulened it ask to be checked by the appropriate sales representative. This is important, as the recorded data may ask errors which require correction and checks must be made to see if any data that has been omitted, needs to be added. T he order form is thus passed onto the Sales Manager for additional checking, approval and authorisation. This is good practice and carrying out this procedure, helps to minimise the misadventures of fraud being ordainted and over charging being recorded on the order form. However, there is still the opportunity of fraud and misuse of capital and assets taking place as other un classic members of rung still have regular and slowly access to the system, so is a weakness in the accountingsystem.5.5It is important that the customer produce an order number as this will informed track the order, but the most important thing is that the purchase order must be authorised. Without this signature the order will not be processed. This is a great strength in that it will prevent fraud, in that goods could not be obtained for employees personal gain, so creating fraud. This helps recruit the ethical principle of integrity.5.6Once an order has been processed, it is sent to dispatches, r eady for transportation. Once the goods have r individuallyed their destination, both the customer and the delivery driver are need to sign the delivery note. This confirms that the goods are been delivered and received. This will prevent fraud, in that the customer could not retract that they have not received the goods..However, if the delivery personnel collects the signatures from the recipient in paper form kinda than collecting these signatures directly on a smartphone or digital tablet, in order to confirm trial impression of delivery and receipt, there is a danger that the paper form confirmation may be lost in transit or may become misplaced, thereof providing no proof that delivery ever took place. The outcome to this is that the customer can abuse this situation by contesting that any goods were received. Also the use of paper has a prejudicious impact and significantly endangers the environment. Having the delivery note in paper format is not sustainable to the envi ronment. .5.7Sales invoices are created and issued via the use of a goods dispatched listing, which are consequently sent out to the customers on a weekly basis. The person responsible for the issuing of these invoices is the Accounts Receivable Clerk. The clerk excessively has the responsibility for inputting the sales invoices into the accounts receivable ledger system, which as well as incorporates the general and accounts payable ledgers, which all run on the Windows Vista computer package package. There is a pixilated weakness in thisprocedure as the purchase orders, dispatch notes and sales invoices are not reconciled against each other. This is a weakness in the accounting system in that invoices could be sent out for the incorrect amounts, or incorrect customers are invoiced for goods that may have not been received. The impact on the company would be the delay of retribution which would have an adverse effect on the companys cash flow. This would as well have an imp act of the companys reputation of headmaster person competence.5.8Inkwell chooses to issue invoices by email, unless a customer requests a posted version. The email method is easy to use and quick to deliver. As emails do not use paper they are environmentally friendly. However, a problem with using emails is that viruses can be transmitted, but with due care and attention, and a strong security software system in place this can be minimised. This is a strength of the companys system.5.9The software for issuing invoices is Sage Line 50 and the invoices are sent out to the trade customers on a weekly basis as instructed by the Finance Manager. As the invoices are processed electronically this helps to minimise the chances of errors and discrepancies. Many handwritten invoices contain errors in the calculations. other strength of processing invoices using the electronic method is that transactions can be traced. One positive part of the system is that all sales invoices are checked for errors by the Company Accountant, by the use of the double entry checking system. This means that there are no time delays en payoffed by having to make amendments to invoices returned due to containing discrepancies in the recorded data so increasing cash flow. This also upholds the company reputation of headmasterism.5.10Inkwell issues credit notes, in order to credit all or part of a sales invoice, for goods which have been returned by the customers. The credit notes have to be counter checked, approved and authorised before they can be issued. However, the Retail Shop Managers actions are not controlled normonitored. The company has placed trust in these Managers, so they have been given the authority to issue refunds on any returns they consider necessary. This gives a Branch Manager the opportunity to commit fraudulent activities and to prepare figures, by abusing their office of power in order for personal and financial gain.5.11To improve the profitability of sight by bear upon payments and minimising the occurrence of bad debts, customer directions showing the payments made, sales, sales returns and calculations, are dispatched every month, by the Accounts Receivable Clerk. This method can be utilize as a reminder to customers that payment is expected and therefore act them into making a payment on their accounts. The statements inform the customers of the status of their accounts, and enables them to make comparisons between the records they hold and that of the supplier.If a customer discovers a discrepancy regarding any of the transactions recorded, they can contact the supplier to question this. These statements can be used as an utile method to highlight any delinquent payments, which need to be chased. The statements prevent fraud by the company in the customer is able to check all the invoices and credit notes issued. This would prevent the company form over stating their account or adding fraudulent invoices to their account.5.1 2Large trade customers have credit terms accounts held with the company. Each customer is given between thirty and sixty days depending on their account status. Trade customers can also benefit from a cumulative discount, each quarter, based on the value of their orders. This incentive is to try and keep a steady flow of business and increase sales, whilst at the equal time increasing Inkwells cash flow due to the prompt payments that would be generated. This is a strength of the company in that increasing sales will eventually increase the net of the company, creating sustainability of the company.5.13All cash and cheques received are compiled and recorded in the cash receipt book. These amounts are so entered into the system using the Sage Line 50 package, in order to update the applicable customer accounts. The Accounts Receivable Clerk, who receives the payments, has the responsibility of banking them on a twice weekly basis. The cash and cheques are held in the companys saf e for security whilst waiting to be banked. This is a strength as it prevents the opportunity for the funds to be stolen, creating fraud.However, there is an increased risk that the cash or cheques may be lost or misplaced, particularly in the event of the office being in disarray, during times of low moduleing levels, disruption and having to meet tight deadlines. If there is a lapse in internal controls regarding the checking and monitoring of the accounts receivable ledger, this creates the opportunity for employees to commit fraud using recognised fraud schemes such as lapping, skimming/hiking, the kiting of cash and cheques, the improper placard of cheques and also cash/cheque substitution. This would not comfort the companys reputation of professionalism and integrity.5.14Customers can splice a remittance advice slip with their cheque payment to inform the company that they have made a payment on their account using the BACS method. This slip details the amounts that have been paid, the amounts that are left owing and what is being paid for. By summarising the transaction details, the slip ensures that the correct amount has been paid. Any discrepancies can be questioned with the customer. The remittance advice slip will be kept with the customers records, as proof that payment has been received, and can be referred and used as evidence in the future.This is a strength as time is not unnecessarily consumed by having to figure out what part of the invoice the payment relates to, as this has already been clarified by the customer. The advantage to receiving payment in the form of a BACS transfer is good, because this is consequence cash and helps to increase the cash flow. However, the receipt by cheque delays the access to cash. This method of payment is slow as the cheque needs to go through the clearing system, and there is a danger that it may be returned by the bank, if the customer has insufficient funds.5.15The company has implemented a policy that should be followed when dealing with overdue accounts. If an account is seven days overdue, the customer is earphoned to request immediate payment. If after fourteen days of the telephone call, the payment is still outstanding, the customer will be sent a letter requesting the immediate payment, in order to bring their account up to date. This is a strength of the company as credit control is an important part of the business, and collecting monies would increase the cash flow and sustainability of the company.5.16The company is being proactive in trying to collect payments before they turn into bad debts and escalate out of control. An stiff approach to the collection of debt helps to boost the companys cash flow and avoids the assistance of debt collection agencies, which bes the business money. Accounts more than one month overdue are inspected by the Company Accountant. Accounts which are overdue by more than two months are reviewed by both the Finance Director and the S ales Director. However, this procedure is not executed, which is a major problem.Both Directors avoid any involvement as the Finance Director has the opinion that the toil is of a tedious nature and the Sales Director is anxious that her involvement will damage her dealing with the customers. The liquidity of a company is very important. Without funds, bills cannot be paid and the company may encounter financial difficulty. There is danger that Inkwells future may be put at risk of infection if debts are not being actively chased. No money coming in whilst money is dismission out has a severe impact on the companys cash flow. If it is known to the customers that the company would not go to a debt collecting agency, then they may take advantage of this and receive goods knowingly that they could not pay so creating fraud5.17The computers which are located in the retail outlets are stand-alone computers. These computers are pointd by Windows Vista software and all have Microsoft Office 2007 installed. However, there is a weakness in this system. Although, shop employees using these computers are not allowed toupload, download or connect any outside turn of eventss, which have not been purchased or approved by the company, as per company policy instructions, issued by the Finance Director on 23rd May 2010, there is no way of monitoring this.All the computers have full internet access including email using the Firefox Internet web browser. Although it is advantageous to have all the computers running on the same software and web browser systems, there is a downside, in that each computer must be updated and configured individually, which is constitutely to the company. Had the systems been networked, this could have been done all at the same time, remotely, thus saving the company time and money. This would have an adverse effect on the companys data and therefore would not be secure and compliant with the Data Protection cultivate (1998). This would also have a negative impact on the ethical principle of privyity and integrity.5.18The companys perfect computer systems are password cling toed which is a strength. However, the problem is that when the computers were installed seven years ago, they were all given the same password, which is Go Green, and no action has been taken to make any changes to this. This has created a grand weakness regarding all aspects of security within the accounting system. Trade customers account and bank details are open to exposure and this increases the risk of being abused. This study can be accessed and stolen by dishonest and shifty persons who use this discipline with the intention of obtaining financial and personal gain, so creating fraud.The companys policy handbook clearly states that each computer must be individually password protected and only authorised users are permitted access. stave are required to maintain the hiddenity of such passwords used in order to protect security. Ho wever, the policy is being ignored and abused by staff, who continue to disregard and follow the rules and regulations, which is evident, when shop employees are allowing unauthorised persons to use the computers for social media etc., without seeking the authority from senior management first. This is a serious intermit of the computer policy and security, as this leaves records, bank details and other priceless information of other staff members, customers and suppliers, open to exposure, which in turn could lead to identity theft,fraud and therefore the Data Protection Act of (1998) is being breached.5.19The computers are protected by Windows Firewall that helps to protect the network, against hackers or viruses. When the controller leaves the workstation unattended, they are required to pound off, however, if they forget to do this, each computer has an automatic timeout installed that has been set at five minutes. If no employment has taken place within this duration, the c omputer will revert to standby mode (hibernation). This saves on susceptibility which is good for the environment. Whilst in the standby mode, any sensitive and confidential information is hidden from prying eyes, preventing fraud such as identity theft, and without the correct password, prevents any access to gain such information.At the end of the working day, all computers are required to be shutdown. Protecting sensitive and confidential information is complying with The Data Protection Act of (1998). To disable the standby mode, the controller has to enter the correct password, which is Go Green. As this password is known and used throughout Inkwell, any employee is able to gain access to this data, and therefore the confidential information is not being protected or secured. It is the companys moral duty to protect confidential information, and they are breaching the Data Protection Act (1998), which carries with it hefty fines and can result in prosecution. This does not uph old the companys reputation for confidentiality and integrity.5.20The Finance Director issued instructions concerning the updating and backup procedures of all the IT systems as per the extract of the company policy handbook, dated May 2010. These instructions required that all of the IT systems are to be backed up twice per day, once at lunch time and again at the close of business. The Company Accountant instructed the accounts department to back up data once only, and only at the end of the working day. This requirement has been in force since the Accountant joined the company, therefore totally irrespective the Finance Directors updated policy. This breach of company policy has already resulted in unnecessary sleddinges in time and money. A power cut that took place in October of 2010 atthe head office premises, late in the afternoon, resulted in the loss of most of the days work. The majority of this information has been re-entered into the system but came at a bell, due to t he number of hours that had to be paid in overtime. This is a weakness and was not hail effective for the company, as these extra trade union movement hours could have been used doing other duties.5.21Maintenance of the recorded song levels in reference to the companys printer cartridges which are held as breed in both the warehouse and shops are not controlled by a password protected, Microsoft Excel spread sheet. Due to the default of password protection being implemented in this area means that there is an increased chance of the data being altered, whether by accident or by intention. The opportunity for fraud to take place is heightened and there is no way of preventing this occurrence happening again, unless the system is password protected. This means that the company is not abiding by the guidelines laid down by the Data Protection Act (1998). It means also that the company is not treating its data with the ethical principle of integrity and confidentiality.5.22The Fina nce Director noticed that the company did not have a proper system in place to record any of the companys business dealings relating to any of the previous years transactions, so the decision was made to purchase an archiving package. However, the Financial Director has lost interest since and no longer considers this working class a point of antecedency anymore. Therefore the implementation of this package has wasted valuable time, effort and money. This is a weakness of the accounting system, in that all records must be kept for six years. By purchasing an archiving system that is computerised would mean that the company would be proactively following the guidelines of the Data Protection Act (1998), but it would greatly help the sustainability of the environment, and would reduce the use of paper.5.23The Payroll and Personnel Clerk completes the annual bath returns using HerMajestys Revenue and Customs (HMRC) guidelines. This highlights the difference between the input tax cha rged on the companys purchases and expenses and the output tax which is charged on the supplies and goods sold to the customers. The net difference indicates whether payment is due to or from HMRC. It is of the upmost importance that the VAT 100 forms are completed promptly and accurately and that payment is made before the deadline is reached.Penalties for submitting a return form late are severe. The Company Accountant is responsible for checking that the details recorded are correct and then passes this form to the Finance Director for re-checking. This is a strength as it minimised the chances of discrepancies occurring or any fraudulent activities being committed. It is against the Law to falsify or omit any information that should be recorded on the VAT 100 form. The company are complying with the VAT Act 1994, s72 (1), (2) and (3) and The Fraud Act 2006.5.24The Income debate and Other broad Income shows the performance of the company over a given period. This statement show s the companys income, expenses and the resultant profit or loss figure. The profit or loss can be careful by deducting all of the expenses incurred including finance expenses and tax costs from the revenue earned to show the profit/loss made. This statement shows entries made using the accruals method.This means that revenue and expenses are matched with each other and recorded when they are recognised (earned/incurred) and not when they are realised (cash received/payment made). Users can analyse the statements and make comparisons with previous years or with other competitors. Both Private Ltd companies and Public Ltd Companies are required by law to submit this statement with the other accompanying statements to Companies House. Various accounting ratios to measure the profitability of the company can be calculated using the financial information as shown on the statement, such as the Gross Profit %, operating(a) Profit %, and Expense and Revenue %.5.25The Statement of Financia l Position also referred to as the Balance aeroplane shows the companys assets, liabilities and equity at a given date, and is helpful for interested parties to ascertain the financial health of the business. A formula which is associated with this statement is Assets Liabilities = Equity. Assets are what the company owns, liabilities are what the company owes and the equity is the equilibrium interest after the liabilities have been deducted from the assets. This statement used in conjunction with the other financial statements can help to assist users when making economic decisions, such as investing, lending, or acquisition etc.This statement can be compared with those of the previous financial years or with the statements of other competitors. The principal users are mainly, investors, lenders and creditors, and like the Income Statement, the Statement of Financial Position also needs to be submitted to Companies House, if the reporting entity is a Private Ltd Company or a Pu blic Ltd Company. Financial information recorded in this statement can be used to calculate various accounting ratios used to measure the Companys liquidity, effective use of the companys resources, their financial position and their gearing (the measuring of how much the company is financed by debt).5.26The Statement of Changes in Equity is part of the set of the financial statements that accompany each other and shows how the equity has changed over the specific year. The statement links information contained in the Statement of Profit and Loss and Comprehensive Income with that contain in the Statement of Financial Position. The Statement of Changes in Equity shows the entries for ordinary capital shares, share premium, maintained earnings, dividends, and unrealised gains on assets etc.5.27The Statement of Cash Flow shows the changes in inflows (money coming in) and outflows (money going out) over the financial accounting period in reference to Operating activities, Investing ac tivities and Financing activities. The financial information recorded on the statement gives a user the opportunity to see how feasible it is for the companys to generate future cash flows, and to assess the companys ability to meet its obligations and to pay its shareholders their dividends.5.28The company does not hold any regular staff meetings and is a weakness in the accounting system. Staff meetings are an effective way to get employees to reside and communicate with each other sharing and exchanging information and new ideas. Such a meeting would also give staff the opportunity to flag up any problems or issues which need to be addressed. When important decisions regarding the company have been made without the involvement of employees, they can be left ruleing frustrated that they have not been given a voice.When the staff members feel undervalued and de-motivated, performance and productivity are affected. Employees may commit fraud as they feel justified by their actions . The number of employee absences may increase and the company will find it difficult to supply their customers as staff shortages may cause delays, due to increased workloads having to be performed by fewer staff members, cost the company money and may damage their reputation.5.29The only form of discussion between the departments is via email. Although there is an advantage to using this method of communication, such as convenience, quick delivery, lack of paper (sustainable for the environment), and cost effective, there are also several disadvantages to using this method, as it creates less social contact, messages can be misinterpreted, viruses can be downloaded, unclaimed spam, and security issues. Another problem that could have a negative effect on the company is the strain that exists between the Finance Director and the Company Accountant, which has been on-going ever since the Finance Director joined the company two years ago. The Company Accountant was resentful that h e was over opineed for this position and feels like he had been demoted.5.30The staff members do not get any form of appraisal which would highlight any performance issues relating to each employee. Therefore there is no way of filtering the staff that is underperforming to those that are exceeding requirements and should be considered suitable for promotion. This is a weakness of the company, and not cost effective as employees feelundervalued and would not work as hard as they should. This will have an adverse effect on the ethical principle of professional competence.5.31The company has an issue with regards to staff training. Rather than investing in training courses that would be advantageous to both new and existing employees, the company only provides a one day crash course for new employees. This gives cause for concern as there is no fully learn staff available to cover in the absence of their peers. Also the company does not actively seek to encourage staff to further the ir skills by encouraging them to participate on any training programmes or courses.This can leave staff popular opinion demotivated and demoralised. Therefore the employee may become unproductive and uncooperative, which has a negative impact on the company. The company may have an excessive turnover of staff, as employees resign due to the lack of future prospects being made available this can result in a decrease in the overall efficiency of the company, which can cost them dearly. This is a weakness of the system, and is not following the ethical principle of professional competence5.32The company does not have any contingency plan in place when it comes to staff absences and so is a weakness of the system. Staff members who are not familiar with the duties of their peers cannot help. This is due to the fact that they cannot get access to useful material such as instruction manuals, guidance tools, help menus, instruction sheets and helplines, as the company have not produced no r made any available. Therefore work does not get done and this has a severe impact on the company as workloads increase, delays occur and errors are made. This can be costly to the company and can damage their reputation of professionalism.5.33The company does not have any staff that are adequately trained on work on other practices. This became evident in the month of September when problems cogitate to the initial stages of the new integrated payroll and personnel system was causing difficulty. The Payroll and Personnel Clerk,who was only given one days intensive training on the system, confessed that she was still struggling to ply the system, even after a month of having worked with it. As no other member of staff was trained on the system, the Payroll and Personnel Clerk had no one to approach who she could ask for help and advice. Another issue that could cause further problems is in the event of the clerk becoming absent from work due to sickness or annual leave, this woul d have a negative impact on the company because they would have no one who could temporarily cover their role. This is a weakness of the accounting system.5.34There is a set of help menus for staff to use on the Sage Line 50 package to help them operate the system correctly. There are step by step guides, online tutorials and PDF guidelines made available, and if any staff member still requires help, they have access to a further phone and email support service. This is a strength as it is cost effective for the company meaning that staff are not tied up shadowing a new employee and are able to still carry on with their own duties.5.35Without sacrificing quality, and working towards ensuring a greener environment, Inkwell chooses to use products that are environmentally friendly. This includes the usage of recycled paper that is purchased from specialist suppliers. All employees are required to adhere to the companys policy of discarding any of unused paper in the cycle bin, which is then sold to a recycling company. Inkwell encourages customers to bring in their old unused ink cartridges in exchange for purchasing re-manufactured ones, and as an incentive Inkwell renders these customers a 10% discount. The company also recycles its own unused ink cartridges, and sends these along with the old cartridges brought in by the customers, to a small number of manufacturers for refilling. This is a strength of the companys system.5.36As an effective way of exposing their existence and improving their delineation within the community, Inkwell Ltd sponsors the local neighbourhood clean-upscheme. This helps install pride within the community. Inkwell also receives an incentive from the Government for their involvement. The clean-up scheme brings members of community together, in their quest to clear the streets of refuge and litter. Walls and signs remain free from graffiti. Children can play safely in the streets, and wildlife remains out of harms reach. The clean e nvironment is attr acting new home seekers, and visitors therefore bringing more money into the community. Employment is rising due to the influx of visitors and the increasing consumer demand that comes with it, resulting in a happy and satisfied community who look favourably upon Inkwell Ltd.6. WEAKNESSES6.1The companys high street shops use standalone computers that are not connected to the network. A problem is encountered when installation of new software is required, as this cannot be installed simultaneously but must be installed on an individual basis this function is time consuming. Frequent upgrading coupled with regular maintenance is super acid, and this comes at a price, therefore this is not cost effective for the company. It is difficult to control and monitor the activities performed on these computers so there is a risk of fraud going undetected. A lapse in the adequate security of keeping confidential information protected is violating the Data Protection Act (19 98).6.2.Inkwell uses the password of Go Green throughout the whole company, which is common knowledge. The company is not adequately protecting the privacy of the sensitive information held on individuals, and this increases the risk of fraud. Employees are not demonstrating good ethical practices as they are allowing unauthorised users access to confidential data, which increases the opportunity to commit fraud by abuse and misuse. The company is legally and morally obliged to protect confidential information under the Data Protection Act (1998), but this is being breached. Compliance with the companys own IT policy is not being adhered to either, as this policy specifically contains clear instructions that all company computers must beindividually password protected.6.3Inkwells policy that was updated in May 2010 by the Finance Director, gives clear instructions that all IT systems must be fully backed up twice per day. This action should be performed around midday and also at the close of business. The new company policy created by the Finance Director is not being complied with. An incident occurred when the company lost data and this came at a cost to the company in both time and money, and therefore they were negligent in their actions. This is not demonstrating good professional business practices.6.4The Microsoft Office Excel program used to store and control inventory levels is password protected but is still awaiting set up procedures necessary to restrict access to authorised users only. At present access is available to all users, which is not complying with the Data Protection Act of (1998), as confidential information is not being adequately protected. Unrestricted access to confidential information increases the risk of fraud, as it creates an opportunity for identity theft and gives a perpetrator the freedom to alter or manipulate the data. The company is not demonstrating good business ethics of integrity and confidentiality, through its negli gence to protect confidential information, and they are violating the Data Protection Act (1998).6.5On the delivery of goods, the driver and the customer are required to sign a delivery note that shows proof of delivery and receipt. The company uses a paper based proof of delivery. The usage of paper has a damaging effect on the environment, and goes against the companys beliefs, and this is not sustainable to the environment6.6Tension and conflict between the Finance Director and Company Accountant, who are not working together, is having an negative impact on the planning andorganising of work that needs to be carried out and completed. As a result the Accounting Technician has not been able to complete all the tasks that have been given to him, by both parties, but this has gone unnoticed. Work that demands priority and that must meet tight deadlines is left uncompleted and put to the side. allowances are not being collected in a timely manner and this is costing the company mo ney.This is not cost effective for the company. The Finance Director no longer has interest in the projects that he gave to the Accounting Technician to complete, which had initially been considered a matter of importance. Any work that has accumulated regarding these projects has resulted in valuable time, effort and money being wasted, which is also not cost effective for the company. Delays are increased as employees are unable to carry out work until others have finished theirs. These delays have a negative impact on the companys reputation because they are unable to supply a professional and reliable service.6.7Contingency plans are not put in place for the absence of employees who carry out tasks that require day to day processing. Sales invoices were not processed for the period covering the last two weeks of July as the Accounts Receivable Clerk was on annual leave. The companys negligence in adequately covering this post has resulted in the credit control activities not bei ng carried out, so monies due during this period were left uncollected. This has an impact on the companys cash flow and is not cost effective for the company.6.8Inkwell accepts payment in the form of cheque as well as other methods. Payment by cheque delays the access to funds, as it must go through a three day clearing cycle process, which does not operate on Saturdays, Sundays or Bank Holidays. Even at the end of this process there is no guarantee that payment will be granted as the cheque may be returned to drawer has insufficient funds in their bank account. This is not cost effective for the company and can have a serious impact on the companys cash flow and profitability.6.9Any customer accounts overdue by three months should be referred to a debt collecting agency who works on the behalf of the company to recover any debts owed. This is in accordance with the companys policy. However, in reality, this policy is rarely followed. The Sales Director, concerned that the active p ursuance of any of these outstanding debts may menace the good relations she currently has with the customers, has decided to avoid the involvement of the debt collecting agency. Consequently, Inkwells cash flow is negatively impacted due to the lack of money coming in and this is not cost effective for the company. Trade receivables are mounting up significantly and bad debts are increasingly that will ultimately result in having to write them off. This loss in earnings will have to be borne by the company as the funds may become irrecoverable.6.10The company do not have regular meetings that give the staff the opportunity to share and exchange information between each other. rule-governed staff meetings could ensure that ruin decisions are made through effective communication, and enable staff to break down any department issues. Because regular meetings are not put in place, this has a negative impact on the company because they are unable operate in an effective and efficien t manner. The company is not demonstrating good business practices as employees get demoralised when they feel unappreciated, undervalued and disrespected. This is not cost effective for the company.6.11Inkwell Ltd does not have a performance appraisal program put in place in order to monitor the professional development of their employees. Performance appraisals can help to motivate staff and improve company morale, as staff become mindful that good performance can result in promotion and recognition. Due to the non-existence of these programs, management are unable to identify and address any issues or elemental training needs of the staff, and therefore are not in a position to offer suitable training that would help staff become better at performing their jobs. This is not making the company cost effective or competitive within the industry6.12Inkwell do not offer training programmes to either new or existing employees, nor do they actively encourage staff to engage and partici pate on any suitable courses, in order to gain new skills, knowledge and qualifications. In a rapidly changing environment, Inkwell needs to be conscious that roles and responsibilities are continually evolving, and should resolve to this by ensuring that employees are provided with appropriate job-related training to ensure that they have the necessary skills and knowledge in order to carry out their jobs in an effective manner. The company is not ensuring that the staff are acting with professional competence.6.13The company have not produced, nor have they provided any on-site instruction manuals that can be used by employees as guidance tools that are a valuable source of reference. In the absence of staff at short notice, due to sickness, other employees cannot be relied upon to carry out tasks of an unfamiliar nature, as they do not have adequate documentation to hand that contains information that can help guide and instruct the employee to carry out a particular task. This will have a negative impact on labour efficiency in that staff would be shadowing new employees and could be neglecting their own work.7. RECOMMENDATIONS7.1Inkwell needs to remove the standalone computers and replace them with a full networked system. The accounting team would then be able to share data, access information and automatically update all the systems at once. This would save the company money in the long run as once installed it would be far more efficient and increase productivity. A quote can be arranged once decisions have been made concerning company requirements. His is a major overhaul which would be beneficial for the company in the long run, but would require further investigating ensure that the best product was purchased for the best price.7.2To comply with The Data Protection Act (1998), Inkwell must make regular updates to password protection every quarter and passwords should be a variety of alphanumeric characters. Each password should be checked for com plexity. Only the employee and the line manager are to know the password. Once in force this will comply with the Data Protection Act (1998). This would not cost the company any money, just for the IT department to set this in place as most computer software has the facility to secure the data. This would enhance the AATs code of professional ethics of integrity and confidentiality, and also make them compliant with the law.7.3The Accounts Department and Company Accountant must comply with the company policy on backing up the IT system twice daily. This will prevent any possible data loss by accident or otherwise. This will in turn entice other staff to follow suit which will ensure ethical behaviour within the company. This will not cost the company any money as a procedure would need to be typed up or the Finance Manager would put a rota in the daily schedule. It would cost a few labour hours, but as the staff are on salary this would be part of their daily role. The benefit to t he company would be that they would not have to pay extra wages for re-inputting the data lost and therefore make the company more cost effective and competitive within the industry.7.4An accurate and updated list with authorised signatories to make entries in the general ledger is of upmost importance to guarantee security of customers accounts and prevent fraud. All sales staff should enter transaction information on the relevant sales data spreadsheet and sign it then pass it to the manager for counter checking and password protection before it is forwarded to the Accounts Receivable Clerk. This action will prevent fraud and be insignificant in regards to the cost of implementation. This would not cost the company anything, but the IT department could establish this system, or it could be written up in the company policymaking it required for the employees to do this. The benefit for the company would be that the company would be able to see who made certain transactions and wou ld be able to detect any fraudulent activities and who done them.7.5The company should consider investing in electronic signature capture equipment which would remove the problem of paper delivery notes when goods are delivered. It will cost the company initially but will pay for itself in the long term as it would guarantee a traceable signature of the receipt of goods including the data and time and also remove the impact on environmental sustainability. An on line quote from Topaz Systems INC revealed a price of 86.00 Excluding VAT per device (see addendum 8.2). This would be beneficial for sustainability of the environment.7.6The attitudes of both the Finance Director and Company Accountant need to be addressed. As senior management, they should both pay more attention and interest to reviewing the tasks of staff and ensuring the tasks are being completed correctly and on time. Management should also ensure the tasks are being distributed to the correct staff which will improve efficiency and performance with no costs to the company. It is important that any differences between the senior heads of management are kept behind closed doors. This is being professional and the impact on the company would mean that it would be a happier place to work in, and would lead to better output, making the company more competitive within the industry.7.7All invoices must be raised day to day without fail as delayed invoices create delayed payments from customers which reduces the cash flow. The company need to address staff annual leave so as to avoid a situation where there is no cover to continue the day to day invoicing. The company should also promote staff training so that employees are trained on more than one job to allow for any emergency staff absence. It could be that the company could employ agency staff for the cover, but this would come at a cost,depending on the agency. This would require further investigation to see if the benefits of employing agency sta ff would actually improve the cash flow of the business. The cheaper option would be for better planning within the company ensuring that all jobs are covered when employees are on holiday.7.8The company should look at phasing out the receipt of cheques and promote the use of BACs transfers as the preferred payment method. This allows the company instant control and visibility of all payments and collections, and allows review of the cash analysis. It is the most secure method of payment for the company and customer, prevents fraud and is of no further cost to the company as it is already a system in use by most companies.7.9The Sales Director and Company Accountant must review any account that is more than two months overdue and same again when three months overdue. By complying with company policy on this, the Sales Director should promptly pass the matter on to the debt collecting agency in order to recover the money and reduce the debt becoming bad. It will cost the company 100 summing up 25% of any recovered funds but will increase cash flow. However, if overdue accounts are reviewed sooner there is a stronger possibility of avoiding involvement of the debt collecting agency. The fact that this would increase cash flow would able the business to be more competitive within the industry.7.10The management must commence regular staff meetings in which any needs or problems can be addressed. Regular meetings will be valuable and important as it will give the staff confidence that the company is listening and acting on any issues they have raised. These could also include the awareness of fraud and the importance of rules and guidelines relating to the Data Protection Act (1998). The costs incurred to introduce regular meetings will be minimal in respect of man hours but will benefit the company in the long term as any problems get resolved and will streamline the running of the business.7.11The company should implement staff appraisals as this will allow fee dback relating to productivity and performance of each employee. Appraisals have been known to improve staff morale, efficiency, motivation and job satisfaction, and can highlight any training requirements needed. A professional company could be employed to provide this service, but is too costly. A decision was made to devise their own SWOT analysis form and a Performance and Development Plan form, which will cost the company minimal hours of labour only (see Appendix 8.3). This would improve on the AATs code of professional ethics in professional competence.7.12Regular training programs should be implemented for staff awareness of their role within the company. Regular training will help staff be more accurate and competent to do their job which helps the company and employee, and in the long term is cost effective for the company. An online quote was carried out to find out the cost of a self-study payroll package for levels 1 and 2. The price is 125.00 exempt of VAT (see Appendi x 8.4). This would ensure that staff were up to date with their knowledge making them professionally competent. The company could send their staff to the local training provider and this would enhance sustainability in the community.7.13Staff should produce an instruction manual detailing their responsibilities and tasks. This would cost the company minimal labour hours in production but would help the company by allowing staff to concentrate on the task in hand rather than being too focused on training others. This would also ensure the task would be accurately and effectively. This would make the company more cost effective and competitive within the industry. As staff are salaried, this would just be an extra job in their daily routine and the only cost would be the printing of the manuals, however putting the manuals on the staff intranet would not cost money in stationery and printing making it sustainable for the environment.