Part 1: Receivables Aging A heavy duty trucks parts re-manufacturing company has
ID: 2547282 • Letter: P
Question
Part 1: Receivables Aging
A heavy duty trucks parts re-manufacturing company has hired you as a consultant to review their current accounting procedures and to provide them with a report addressing changes that you feel need to be made for them to improve their internal controls, and the accounting and reporting processes.
The company president does not understand the recommendations that you have offered to improve the accounting and reporting of uncollectible accounts. The company currently uses the direct write-off method and you have suggested that they use the accounts receivable aging method to estimate their future bad debts. The president stated:
"In my opinion, financial statements should be based on what actually took place rather than what we think will happen in the future. In other words, I think they should be objective rather than subjective. After all, our bad debt expense has been almost the same amount for each of the past three years and is thus very predictable. By using the direct write-off method, we are reporting exactly what took place. Why do we need to change?"
Draft a 1 page memorandum in Word responding to the concerns and objections of the company president, and in support of your recommendation for the company to adopt the receivable aging method going forward.
Additional Requirements
Written communication: Your memorandum should be clear, well-organized, and support a central idea, with no technical writing errors, as expected of a business professional.
References: References and citations should be formatted using current APA guidelines for style and formatting.
Explanation / Answer
The process of review and audit of internal control systems
The board of directors are responsible for the review and maintenance of internal controls.
The management of the company are responsible for the devising and implementing these
controls.
The Turnbull Report (1999) which has also become part of the Combined Code focuses on
the review of internal controls.
Key points in the Turnbull Report:
· Have a defined process for the review of effectiveness of internal control.
· Review regular reports on internal control.
· Consider key risks and how they have been managed.
· Check the adequacy of action taken to remedy weaknesses and incidents.
· Consider the adequacy of monitoring.
· Conduct an annual assessment of risks and the effectiveness of internal control.
· Make a statement on this process in the annual report.
Conformance, compliance and efficiency
This is focussed on the administration of decisions”.
Processes and procedures should be regularly reviewed.
This would ensure that decisions are made on results of the company that are timely, accurate
and relevant.
Audit programmes and procedures should be drawn up ensuring effective coverage of
financial, management, operational and compliance issues. For example, reporting standards,
regulations, health and safety, security and competition.
Performance and business risk
This is focussed on the quality of decisions”.
The comparison of an organisations performance with that of the others is an important part
of performance measurement, identifying organisations (not necessarily in the same industry
as yard stick for which performance can be compared to. The board must identify the key
risk areas and key performance indicators of the business and continually monitor and
compare these to improve the business processes and help safeguard against any impact by
competitors. Management make detailed reports on these benchmarks to the board to help
them carry out this monitoring process.
The board should set clear lines of accountability and assignment of responsibility to the
appropriate managers through the company.
Management should report to the board their review and implementation of internal controls
and risk management systems.
The board should review the performance of management in dealing with internal controls
and risk management systems. They normally have assistance in this area from internal audit.
Internal audit is an appraisal or monitoring activity established by the board for the review
of the accounting and internal control systems as a service to the entity. It functions by,
amongst other things, examining, evaluating and reporting to the board on the adequacy and
effectiveness of components of the accounting and internal control systems created by
management.
Internal audit is seen as independent from management who are devising and implementing
the internal controls, and should be able to provide advice on internal controls both to
management and the board. Internal audit being independent from management can also
review and advise on the audit the risk management process used by management to
systematically identify the risk impacting the business.
Then you will need to use APA format to organize your paper and list the references you used. If you’ve never used this format before, you may find that it is quite a bit different from some of the writing styles and guidelines you have used in the past.
While it might take a while to get used to, learning how to write an APA paper is a useful skill that will serve you well whether you are a psychology major or just taking your first social science class.
What Is APA Format?
APA format is the official style of the American Psychological Association (APA) and is commonly used to cite sources in psychology, education, and the social sciences. The APA style originated in a 1929 article published in Psychological Bulletin that laid out the basic guidelines. These guidelines were eventually expanded into the APA Publication Manual.
So why is APA format so important in psychology and other social sciences? By using APA style, researchers and students writing about psychology are able to communicate information about their ideas and experiments in a consistent format. Sticking to a consistent style allows readers to know what to look for as they read journal articles and other forms of psychological writing.
If you have never taken a psychology or social science class before, then you are probably accustomed to using a different style guide such as MLA or Chicago style.
In most cases, your paper should include four main sections: the title page, abstract, main section, and references list.
1. Title Page
Your title page should contain a running head, title, author name, and school affiliation. The purpose of your title page is to let the reader quickly know what your paper is about and who it was written by. Learn more about writing an APA format title page.
2. Abstract
An abstract is a brief summary of your paper that immediately follows your title page. According to APA format, your abstract should be no more than 150 to 250 words although this can vary depending upon the specific publication or instructor requirements. Learn more about writing an APA format abstract.
3. The Main Body
For something like an essay, the main body of your paper will include the actual essay itself. If you are writing a lab report, then your main body will be broken down into further sections. The four main components of a lab report include an introduction, method, results, and discussion sections.
4. References
The reference section of your paper will include a list of all of the sources that you used in your paper.