Improving Information Systems and Internal Controls of the Yuma Snowbirds’ Accounting System
This report identifies, analyzes, and recommends improvements in various aspects of the Yuma Snowbirds accounting information and internal control systems. The report makes reference to information from the Encyclopedia of Business and Finance as working definitions for internal controls and information systems.
The importance of information systems and internal controls
Effective accounting information systems facilitate manual and electronic transaction processing, such as check writing and cash spending and facilitate financial reporting, such as tax return preparation and audited financial statements. Internal controls are those decisions implemented by management that facilitate compliance with regulations, reliability of financial reports, and profitable operating procedures.
Issues that require management attention
$ Profitability of operating units
$ Transition to September 30 fiscal year
$ Change in financial requirements in transition from IHL to NHL
Improving profitability will depend on the organization’s ability to respond to these issues by making material changes in areas such as sales, cash management, purchasing and inventory, and accounts receivable and payable. The partners must use consistent methods of accounting and cash management in each unit, accompanied by a lack of preparation of monthly financial statements for the organization.
Observations and recommendations
Snowbird Wear should use the same order-purchase verification system that the pub ans snack shops use. The outside business relationship of the shop manager with the suppliers does not provide an adequate control system.
Second, the snack bar reports a system for accounting for cash on hand for registers. The pub and store should implement the same cash reporting procedure.
The roving vendors system is complicated and could be simplified by using the 2 to 5 existing part time employees to reduce turnover and simplify the inventory process.
The accounts payable system should be examined and the rational for the 20 day pay cycle should be explained. The system should account for items such as net discounts and for grace periods beyond 20 days. This allows the organization to maximize cash flow while maintaining credit standing with suppliers.
There needs to be better definition of duties among the three employees that perform financial management function. The relationship between the accountant and the financial manger, and which person is responsible for financial statement preparation should be quantified. Based on the limited financial reports presented, the partners cannot determine the financial performance of individual units ( team, pub, store, snack bar), nor can it prepare adequate financial statements for use in tax preparation or audit. A monthly reporting procedure that coordinates with the fiscal year should be implemented. Month one begins October 1, and month 12 ends on September 30.
Each month partners should receive an income statement, statement of cash flows, and a balance sheet. Monthly reports should include statements for each operating unit, and consolidated financial statements for the organization. The income statement can be forwarded to the tax preparer. Consolidated financial statements will facilitate an audit that will eventually be required by the NHL franchise.
Yuma Snowbirds partnership must improve its internal accounting controls by consolidating accounting methods in each of its operating units. The organization must improve its information systems by preparing per unit and consolidated monthly financial statements.
“Accounting Information Systems.” Encyclopedia of Business and Finance. Ed. Allison McClintic Marion. Gale Cengage, 2001. eNotes.com. 2006. 14 Oct, 2008 <http://www.enotes.com/business-finance-encyclopedia/
“Internal Control Systems.” Encyclopedia of Business and Finance. Ed. Allison McClintic Marion. Gale Cengage, 2001. eNotes.com. 2006. 14 Oct, 2008 <http://www.enotes.com/business-finance-encyclopedia/