ICAS Report Plan Essay

Sandwich Master Limited (SML) was established over seventy years ago by the Graham family. It makes and sells sandwiches and savouries to the general public. The company’s head office is on industrial estate just outside of Nottingham. A central savoury production centre is in Leicester a few miles away. Products are sold through a nationwide chain of over eighty street shops, and six regional bakeries. Department which is going to be reviewed is Sales Ledger (Accounts receivable). 80 % is made cash sales and the remaining 20 % on open credit terms. 2.

A bank reconciliation statement is produced monthly which reconciles the cashbook to the bank statements. All the statutory forms required by HMRC such as P45s, P60s, P11Ds are issued. The payrolls for management and salaried staff are operated by payroll clerk and run a few days before the end of each month. It is strongly advisable to produce financial statements in order to show how the business has performed and what assets and liabilities it has. The two main financial statements are the income statement and the statement of financial position.

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The income statement summarises the transactions of a business over a period and determines whether the business has made a profit or a loss for the period. The statement of financial position is a list of all of the assets and liabilities of the business on the last day of the accounting period. 3. Re-order information to the suppliers is based on series Microsoft Office Excel spreadsheets. SML’s main financial accounting systems are an integrated set of Ledgers and a costing package, which runs on the Windows Vista environment.

Newer version of Windows would probably speed up all the operations and provide a better secure environment for data kept. General accounting package such a Sage might be very useful software to help with setup, support and bookkeeping. It would make easier to create reports, track expenses and complete the necessary tasks. Weakness Implication Large number of contract customers is not controlled (Accounts receivable). Customers are given open credit terms of 30 days, but in reality average payment is over 60 days.

Also monthly credit limit for each account is set to ?4,000 pounds which is more than the customer needs and more than is stated in company’s policy. | It’s having massive impact on the liquidity of the company (20% of the company’s revenue) and the trade receivables collection period. | The Payroll’s run by Payroll Clerk are usually based on incorrect information (estimated figures). It’s leading to situation where majority of employees are complaining about payments received. | It’s demotivating. Employees are being less enthusiastic about a job which is leading to inefficiency.

Cost of work is increasing and the potential margin will be lower. As a result financial statements produced may contain incorrect figures. | Company policy relating to its IT systems is not followed by the employees. Majority of them is unaware of damages it may cause. Many of the shops may still have the same original password. There is no checks ever been carried out. | Potential loss of data or destroy of software might be really cost effective. Employees has a access to important information which shouldn’t been known or might alter figures leading to falsify the data. | Fraud

Area of risk| Likelihood| Impact| Current controls in place| Net likely impact| Action| Sales ledger control account – alter records| High| Incorrect (outstanding) figures, lost profit, may lose a customer| None – being managed without checking| High| Requires control on regular basis,| Inventory – adding, large quantities| High| Additional cost, lower profit, increasing wastage| Unannounced checking| High| Requires control on regular basis,| Petty cash box – cash and cheques left in the tills| High| Reconciliation differences, sums outstanding, physical security risk| Investigation| High| Money should be banked on daily basis|

Recommendation| Costs| Benefits| Support for staff| 1. Changes should be made according to company policy by Sales ledger control account clerk. Set up equal credit limit for each customer. 2. Rotas should be sent (via email) at end of each week after being checked by shop manager. 3. Every employee should be given his own password. | Additional cost involved and time needed. Company might be obligated to pay for training.

No additional costs. Additional costs – IT service needed. | Outstanding sums will be lower. Improved service – dealing with customers and liquidity. Reduced errors made every week. Increase employees efficiency. Avoid potential lost of data or destroy of software. | Training provided which strongly required to this position. Written guide is needed. Written policy (employees have to be aware of potential risk it might cause). |


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