Question

audit ethic paper

Ethics Paper - Topic 5 It's Slow Moving Inventory Topic: Asset Valuation/Write-Downs Jasmine is the first Controller ever hired at a medium-sized technology company. The firm has reacquired computers and other parts and equipment from high-tech firms who filed for bankruptcy or were seriously behind in their monthly payments during a recent two year downturn in the economy. In addition, the firm has acquired some miscellaneous inventory from competitors experiencing the same misfortune. One of Jasmine's initial goals is to determine how accurately the inventory on the books reflects its fair market value. As she walks with Marcus, the inventory control clerk, through all the equipment and inventory pallets, she notices that numerous parts and machines look dated, and dusty. Marcus informs her that while only about a third of these items are repossessions, most are from overruns or the recession; "many have been sitting on these skids for years." As Jasmine inquires further, it appears that this problem is extensive, and that this inventory moves slowly. When the inventory does sell, it is at a significant discount, Raina, the Sales Manager, indicates that these are really tough times to sell this stuff, especially because most of the "slow movers" are large-ticket items. In fact, Raina feels sorry for her sales staff since they have been forced by the company president to push these items with only 2 percent more in commission. Finally, Jasmine approaches Terry, the Company President, about this problem and asks what he intends for her to do about the dilemma. Terry informs her that he believes that many of these items are salable given appropriate marketing and the right economic conditions. Besides, some of his major customers owe him a few favors. Terry also indicates that now is not the right time for the company to take a hit from inventory revaluation. During the ensuing months, Jasmine did not see much movement from these stacks. She again approached Terry and asked how he would address this issue when the audit came. Terry reiterated his former response regarding product salability and stressed actual sales across all product lines to the auditors. He asked Jasmine not to point out this problem to the auditors and finally said, "just see if they notice it. And if they start nosing around in it, I hope you'll be able to show them that some of these items are turning over." Jasmine interpreted Terry as saying she should help falsify records if it looked like the auditors were discovering the slow movers. Jasmine didn't know what she would do next.

Answer 1

The above Problem welcome mix of problem in the Organization and Jasmine as a Financial Controller is very much confused . She understood that entire organization is running very POOR and sluggish way. She noticed that None of the area is running or rather managing in a professional way . Like – Sales are not in good shape , Inventory is absolutely in bad phase – Old days , high value ticket Inventory is lying without any proper physical verification – President of the company is not confident about this business – He is given excuse of economic slow down . She insisted to sale old dusted Inventory to sale at a low price – Sales team is not happy with Commission and Most concern point his , President is informing controller NOT to disclose real fact to Auditor – This is real crime , fraud and absolutely against of Ethic.

Jasmine as a financial controller should be very strict . She should adhere a complete Financial Audit of this company . She should not hide any important fact infront of Auditor. She has to convinced her Group President in this matter .

Jasmine as a financial controller first thing to consider on Inventory . She should first complete basic Inventory physical verification . She should review Inventory Ageing report and need to segregate fast moving , Avg moving and slow/ Obsolete Inventory . In case of Old/ Obsolete / Slow moving Inventory , she should implement proper Provision policy and make proper Provision in books to take ONE TIME hit in to Company Profit and loss account and she needs to explain all the above matter tactfully to Group president .

Hiding from Auditor is not the correct way of working . She has to start Process Audit and submit daily progress report to Higher Management .

Inventory Valuation , physical verification , proper ageing report , Provision for old days Inventory , maintain Inventory ‘ABC analysis “ – she should start with immediate effect and inform management accordingly.

After Inventory ,she must concentrate on Companies Revenue . She should derived policy and process relates to revenue model . She needs to discuss with Management + Sales head and ensure that sale of OLD dated Inventory ( clearance sale) with high discounted price and absorb LOSS in financial at ONE TIME.

One time , company has to take BIG amount of loss in books in relates to Inventory valuation as well as high discount sale .

After reshape , she should concentrate on other Inventory sale process and design proper commission structure for sales team .