Listers Group is England’s largest privately owned motor group, with over 40 dealerships representing various major motor brands. They are franchise partners for Audi, BMW, Honda, Mercedes-Benz, Mini, Smart, Toyota, Volkswagen cars and commercials, Lexus, and Land Rover. Listers group excels in the sale of new and approved used cars and vans, as well as providing servicing and parts. Their excellence in these areas has led them to win several national awards.
Principles of Internal Control 1: Understanding the Role of Accounting within the Organisation
aThere are multiple accounting functions within the Listers Group that directly engage with the on-site department. These functions encompass Sales, Parts, Site Accounts, Administration, and Workshop. The main objective of the on-site Accounts team is to handle direct invoices, customer payments, and customer finance related to car purchases. In order to complete the financial aspects of a deal, the accounts team relies on sales for making initial sales, administration for processing all documentation, and accounts for finalizing the financial side of the transaction.
The head office accounts team uses the accounting system called Elite to process month end accounts. They gather all the relevant information from ‘their site’. Appendix 3, which contains the dealership numbers, is also important. It is essential to have strong internal relationships among all teams to ensure good communication and dependency between both sides. This is necessary in order to gather and accumulate accurate information, which is crucial for the growth of the business. Additionally, there is an annual release of a new registration plate in March and September. This results in a surge of orders in the months leading up to these dates and a peak in sales during March and September.
It is essential for the Sales and Accounts departments to have a strong relationship to ensure accurate and timely information and forecasts. This is crucial for creating and adjusting budgets to accommodate changes and maintaining a healthy cash flow system. Additionally, 1. 2aLister’s uses the Elite system to generate financial information and statements, which serve as formal records of the business’s financial activities and aid accountants in making important decisions.
The Income Statement provides information about a company’s income, expenses, and profit during a specific period. Accountants prepare the profit and loss account every month, allowing them to analyze and predict future outcomes. Additionally, it is used to compare budgets with actual costs to identify discrepancies and achievements, and it can serve as a benchmark for setting targets among different locations. On the other hand, the Statement of Financial Position presents details about a company’s assets, liabilities, and ownership equity at a specific moment in time.
This text is about the importance of reconciling stock, collecting debts, and having enough money in the bank for a motor group called aListers. The Cash flow statement is mentioned as a report on the company’s cash flow activities. Sometimes, the company needs to wait for finance to clear before receiving money, which can generate interest. aListers is described as a large privately owned motor group specializing in the sale of new and used vehicles, serving as franchise partners for various car brands.
The business has important relationships with various stakeholders, including government, motor trade, customers, and suppliers. For detailed information on these stakeholders, please see Appendix 7 – Stakeholders Interest Grid 1. The organization operates through dealerships with staff members in different departments. Each department has its own onsite accounts teams that provide information to the head office accounts department for month end accounts. The head office accounts team is structured in a specific way and adjusts the system to meet the needs of each person at each level. This ensures control over access and usability of different sections of the accountancy package through system restrictions.
The main role of a Head office employee is to oversee the operations of dealerships and ensure they adhere to manufacturers’ standards as well as Listers group procedures. The accounting structure for Head office, which can be found in Appendix 1, might require adjustments to accommodate any modifications in external regulations or internal organizational policies and procedures.
Two external regulations that impact the accounting practice within the business and its users are government schemes, such as the Scrappage allowance, and VAT laws. When the government Scrappage scheme was in use, it affected the users within our accounting business significantly. It required a significant amount of time to be dedicated to conducting appropriate checks and producing additional paperwork. This was necessary to ensure that all new car deals eligible for a scrap page allowance were accurately and effectively handled in accordance with the government guidelines.
Procedures and organisational policies had to be amended to coincide with the new regulations. The VAT changes also impacted the business as computer systems and calculations needed to be updated to ensure accurate VAT amounts. This resulted in downtime for users while changes were made. Additionally, procedures and spreadsheets were adjusted. Understanding the importance and use of internal control systems is essential. External regulations that affect accounting practices include government legislation, which consists of laws and guidelines that must be followed.
HMRC – Must comply with VAT laws. FSA – Financial Services Authority. The FSA is responsible for regulating all financial services in the UK. Since we offer various insurances and sell products through a finance service, we must follow the FSA’s regulations. This requires us to be on the register and meet their regulatory requirements.
Appendix 2 – Lepest analysis 2. The main types of fraud that can occur in accounting practices are:
- Theft
- Unauthorised buying
- Unauthorised overtime
- Expenses
- Money laundering
Poor management and setup are the underlying causes of these fraud types, and they can significantly impact the accounting system and business. Theft, for example, occurs when an employee directly steals cash or stock from the business, resulting in a direct loss for the company. Unauthorised buying can lead to lower profit margins.
Suppliers should only be used when necessary. Employees might try to work extra hours in order to receive overtime pay, which can be avoided by maintaining a steady pace that doesn’t require overtime. Expenses may also be reimbursed for items or services that are not allowed according to company policy, resulting in financial losses. Failure to establish and follow proper policies can lead to money laundering within organizations. For information on preventing money laundering, consult Appendix 4 – Money Laundering Policy. Methods can be utilized to identify and decrease fraudulent behavior.
In order to prevent theft and the fraudulent submission of claims, the petty cash process should involve two individuals. It is important to regularly inspect and reconcile the petty cash to ensure that there are no discrepancies or questionable handling of money. Regular stock takes and audits of assets should be conducted to ensure the accuracy of company records and minimize the occurrence of theft. Additionally, purchase orders and check signing should be carried out and approved by a higher-level authority to avoid conflicts of interest.
This measure ensures that no unauthorized purchases are made. Overtime is not compensated within the organization, but other organizations may have procedures in place to supervise employee overtime and prevent exploitation. Employees must consult their line manager before making purchases with the intention of reimbursement. Expense forms must be completed, with accurate and current receipts attached.
Before any funds are disbursed to an employee who makes a request, the company adheres to an approval process in order to verify the authenticity of the claims. The company takes measures to mitigate the potential for money laundering, particularly given their involvement in high-value transactions. There are limitations imposed on the monetary value that can be transferred during a transaction. Additional details regarding this subject can be found in Appendix 4 – Money Laundering Policy and Appendix 12 – Fraud Analysis 2. Both statutory and organizational obligations must be adhered to, and the business has established controls to ensure conformity.
All paperwork is initially stored within the department for 1 year. After that, it is transferred to other offices for archiving where it is kept for an additional 6 years. This means that, in total, all paperwork is retained for 7 years to fulfill our audit purposes. Moreover, we have an internal auditor who ensures that all audit requirements are fulfilled on a daily basis. Following our year end on March 31st, we undergo an external yearly audit. To maintain control, we implement management direction and motivation as a direct measure. This involves establishing targets and procedures that must be adhered to in order to meet the business requirements.
Weekly team meetings are conducted to discuss progress and address any challenges we face. The company provides various resources to support employees in meeting the business requirements.
Appendix 5 – Month End Accounts Procedures 3: Be able to identify and utilize the appropriate accounting system that meets the specific organizational needs. 3.1a: Most accounting packages have weaknesses. One weakness we have identified in our system is its slow performance during critical times of the month, especially when generating month end reports.
When multiple users in a large accounting department are simultaneously accessing the same areas of the accounting system to make postings and produce reports, it can lead to frustration and tight deadlines. This can also cause the system to freeze as a result of the high volume of people processing information from the same screens. Furthermore, there are potential errors that can occur within the accounting system, such as incorrect invoice pricing and keying, improper distribution of petty cash, and fraud (see 2. a and 2. 3a), which can occur due to negligence in control and lack of multiple operators. Additionally, various forms of fraud, including dummy suppliers and employees, theft, unauthorized spending, and expenses, can occur in an accounting business. Accounting systems play a role in supporting internal control by implementing structures and restrictions to ensure that only relevant users have access to specific areas, thereby protecting sensitive information from being exposed to unnecessary users.
Also, there may be restrictions on nominal ledgers and accounts to prevent unauthorized users from making incorrect postings, thus reducing the chance of errors. Support is necessary to ensure effective and efficient usage of the package, providing benefits to the company. This support can be provided through discussions, meetings, and training sessions by superiors and management. Our company also provides written information manuals and step-by-step procedures, which help guide users and maintain organizational control within the system.
Appendix 5 – Month end accounts procedures Most accounting systems will have help menus within the toolbar to assist with any direct problems you are having with the package. One of the systems used in our business requires us to participate in online training courses and pass a test to ensure competence. This is necessary for each section of the system before full access is granted. It serves as a good method of supporting users by ensuring they have a good understanding of the system before using it.
An accounting package offers numerous benefits for organizations, including fast and accurate recording and storage of information that can be easily accessed by relevant users. Consolidating all or most required information in one place is advantageous, as manually collecting data from different sources can be time-consuming and prone to errors or misplacement of important information. However, some smaller organizations may still prefer manual methods for recording accounts.
The accounting system we use, Elite, provides significant value and benefits to our organization. It enables us to consolidate relevant information into a single platform and grants access to this information to the appropriate users. This allows us to generate reports efficiently for business purposes, saving time and ensuring accuracy. The system also incorporates error detection features, such as flagging journal misposts and incorrect data entry.
The system will notify the user if duplicate reference numbers are used and prevent posting to incorrect nominal ledgers, both of which can cause problems with a manual system. The accounting system used by Listers is Elite, which is relied upon for various accounting processes. The only manual processes are the petty cash process and expense form completion.
The system needs to be used regularly and should be user-friendly, quick, precise, and affordable. It should accommodate multiple users accessing specific sections simultaneously and have security measures in place to prevent unauthorized access to confidential information. Additionally, it should be capable of generating reports and organizing information based on different time periods. The system is utilized for generating financial reports and serves as an audit trail by assigning usernames to each user’s postings and activities.
Appendix 6 – Screen print users name trail 1. 2bAll month end reports are printed and reconciled and must be kept. These are kept for 1 year on site before being moved to a separate location for archiving purposes. Currently individual deals need to be run on large A3 sheets. We must then individually go into each deal and attach to the main deal analysis. Each site can do approximately up to 300 deals a month which then results in a large mass of printed invoices and month end accounts to produce financial information.
This meets the requirements of the business but it results in a loss of resources and wasted storage space and capacity. Although the system has been fulfilling its purpose, there are weaknesses and room for improvement, which may require using a new package. Ultimately, this will be beneficial in the long run, but it will lead to significant changes in the company in the short term. The accounting department is large, and each team utilizes the accounting package in a similar and constant manner.
At the end of each month, the system slows down significantly because each team in the department needs to run large reports. This has become a bigger problem as the business grows and more users are added, resulting in even larger reports. As a result, the system becomes slower and sometimes crashes, especially during critical times of the accounting calendar. One way to address this issue is to update the software package to better accommodate the company’s expanding needs. By doing so, deadlines and targets can be met without the system freezing.
By implementing this change, reports could be printed more quickly, resulting in a decrease in idle time and a financial benefit for the company. As a result, the company would no longer need to pay employees during this idle time. However, the company may face challenges in terms of increased costs associated with running a better accounting package. This includes training costs and the need for a complete overhaul and amendment of operating procedures. Additionally, there is a risk of potential fraud due to a lack of control within the accounting system.
If the controls mentioned in 2.2a and 2.3a are not implemented, the risks could be significant. The potential risks include petty cash theft, unauthorized buying, dummy suppliers, overtime, theft of stock, and dummy employees. For risk analysis and grading of these risks, please refer to appendix 12 – Fraud analysis 1.5b. The current accounting system is used because it serves its purpose and was the most cost-effective package for running the business smoothly, as identified through cost analysis.
The business is experiencing growth and an increasing number of users are using the system. However, this growth has also revealed several weaknesses and areas for improvement. These weaknesses in the system could have significant long-term costs for the business. Specifically, the system becomes slow and unresponsive during critical moments, leading to wasted time and frequent freezes that hinder user productivity. Additionally, the system’s reliability during important accounting periods is quite low. While we can anticipate certain times when the system will be overburdened and slow, we cannot predict when it will crash.
Errors may occur during the vehicle invoicing process if incorrect stocking categories are selected. The system does not have the capability to detect such errors, and as a result, deals may need to be reversed and amended. Usually, these errors are only discovered during monthly reconciliations. Consequently, the accountant must identify the error, inform the user, and then the user will have to reverse and re-invoice the affected invoice. Subsequently, the reconciliation process must be repeated.
The current accounting system used by the business is not effective in identifying errors, resulting in wasted time and resources. This indicates that although the system is affordable, it may be costly for the company due to its ineffectiveness and lack of reliability. It is recommended to evaluate a new accounting package and its benefits. To improve the accounting system, it is suggested that a cost analysis should be conducted to determine if implementing the new system would be advantageous for the company. This information can then be used to propose the adoption of the new package. Appendix 8 provides a cost analysis, which demonstrates that the new system would be more up-to-date, faster, adaptable to changing technology, and capable of accommodating multiple users without slowing down during critical periods. Therefore, it is assumed that less time would be wasted waiting for the system to respond, allowing for more productive utilization of time. Furthermore, the new system would include a feature that ensures correct coding of invoices.
The system will detect if a non-franchise vehicle is mistakenly assigned a franchise code during the sales admin process, preventing this error from occurring and reducing the need for corrective actions and missed communications. Additionally, an automatic credit feature can be implemented to halt further credit for customers with outstanding payments until they settle their overdue amounts. This measure will help save the company from bad debts and the expenses associated with credit controllers. Moreover, condensing information into smaller spaces would increase efficiency and resourcefulness.
The text describes the advantages of a detailed and organized web page with different tabs. This layout enables users to access various sites simultaneously, which is advantageous for transferring stock or inventory between sites. By making these recommended changes, individual users of the business will benefit. When the system is slow or unreliable, it becomes challenging for users to concentrate and stay motivated to complete their tasks. Consequently, a slow and unpredictable system can lead to demotivation and lower morale among users, particularly when working under tight deadlines.
A more advanced system will enable users to generate reports and month-end prints more quickly, increasing productivity. This time savings can be utilized for analysis and Key Performance Indicator (KPI) work, which can be simplified for non-financial employees to improve overall understanding of the business. Additionally, the new system offers training facilities, allowing for more training to be provided at no additional cost. Implementing such a significant change within a business will have a major impact on its users.
In the short term, replacing the current accounting package may be perceived as disruptive and inconvenient for its users. They may struggle with unfamiliar layouts and have difficulty understanding how it operates. To assess the needs and effects that this change could have on users, it is recommended to administer a questionnaire. Appendix 9 – User Questionnaire and Appendix 11 – User Questionnaire Complete provide the necessary resources. It is not beneficial for the company to have staff operating a new system if they are not utilizing it to its full advantage.
Both employees and users must undergo comprehensive training to become proficient in the system. This training can be conducted online or in-house, and assessments may be administered to verify competency before granting full access to the package. The implementation of new procedures will aid in the training process for the new system. In addition, regular meetings should be organized by the system implementers, inviting key users to provide input and ensure all requirements are fulfilled.
This will also enable suggestions to be made in the formatting of the package or within the manipulation of the reports, which could be generated. By doing this, it will assist users in utilizing the system more effectively. The new system may also bring about changes in various aspects of users’ job roles, allowing them to undertake additional tasks or expanding their responsibilities. It is crucial to hold meetings for progress tracking regarding the users and their roles to ensure optimal utilization of the system.
The implementation of a new system would bring significant benefits to the company, but it would also have implications. These implications would impact the company in various ways. The recommended approach would require considerable time and dedication to fulfill its objectives. Additionally, there would be financial costs involved, as new procedures need to be developed. These implications are further elaborated in appendices below:
- Appendix 8 – Cost analysis
- Appendix 10 – Implications of implementing a new system
