A Review Of Accounting And Ethical Practices As Well As An Analysis Of Internal Control System On Performance Improvement: a Case Study On a To z Vehicle Hire Company
Terms of reference
There are several terms of references behind conducting such study as follows:
- The rationale behind the preparation of present report is to shed light on the need of internal control aspect and accounting system. Moreover, there are several loopholes which prevail in the accounting practices of A to Z Hire company. In this, report will present the manner through which undesirable aspects can be removed from the accounting practices of A to Z Hire Company. Hence, it is one of the main reasons behind initiating such study which in turn helps in overcome the weaknesses if firm to the significant level.
- Further, in the business organization it is the responsibility of higher management team to make proper balance in the stakeholder’s interest. Thus, the main motive of conducting such study is to analyze the extent to which accounting rules and regulations are followed by A to Z or not. Thus, such report will highlight the importance of internal control system and thereby depicts the manner in which it assists in making suitable decisions.
- In addition to this, managers of the firm are not in position to take suitable monetary decisions when they do not have idea about cost and associated benefits. Thus, reason associated with conducting such study is to analyze the cost that is related to practices of A to Z in terms of money, staff time and other resources.
For conducting study in an effectual way, appropriate selection of tools and techniques are required. Moreover, in research effectiveness of outcome is highly affected from the tools that are undertaken for such purpose. Hence, methodology clearly entails the techniques which researcher undertakes during the whole investigation. Thus, it acts as pathway which in turn provides direction to the researcher in whole study. Further, methodology selection is based on the type of issue which is going to be investigated. In the present study, to evaluate the accounting and internal control system of A to Z following methodology has been undertaken by the researcher:
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- Delivering the orders as fast as possible
- Providing maximum satisfaction at affordable rates
Data collection: With the motive to make evaluation of accounting and internal control aspect of A to Z secondary data sources have been used. Hence, to meet the research objective significantly several books, journals and other scholarly articles related to the accounting system have been used for extracting suitable information. Thus, books and articles which are related to accounting and internal control system or practices have been evaluated for the preparation of brief thesis. Moreover, without having understanding about topic or accounting aspects one cannot analyze the data set regarding A to Z in the best possible way. Thus, by using such secondary data sources in-depth investigation of case study has been done. For the fulfilment of research aim secondary data about the following aspects have been gathered such as:
- For getting in-depth understanding about the functioning and practices of accounts department of A to Z analysis of case study has been made. Thus, for giving high suitable suggestions for improvement purpose an analysis of books and journals have been made.
- Beside this, for making assessment of accounting rules and recording aspect of A to Z analysts must have understanding regarding the same. Thus, scholarly articles related to accounting rules also have been evaluated for determining suitable solution from data set.
- Along with this, for developing better insight about the ethics and sustainability aspects associated with accounting aspect books and journals have been evaluated. This in turn helps in giving highly suitable recommendations to A to Z for the purpose of improvement.
- Further, articles related to internal control system also have been evaluated for understanding about the same.
Hence, through the means of internet surfing data regarding accounting practices and internal control system has been collected. Moreover, internet has huge collection of books, journals and scholarly articles which in turn helps in evaluating data set in the best possible manner.
In the business organization, internal management and control is highly required for assessing as well as removing deficiency level within the suitable time. Hence, by maintaining proper accounting records and making evaluation of the same with actual aspect firm can assess the fraudulent activities. On the basis of such aspect, by making evaluation of business practices on a periodical basis business unit can assess the areas that require improvements. A to Z Vehicle Hire is the leading small sized organization that offers regional car and van hire services to the individuals. Such firm includes three different firms such as AA Milnes Car hire (Northfield), Vans to go (Southdown) and Midway minibuses. Cited case study clearly presents that Vans to Go was established in the year of 2010 by Mo Khan. Mission statement of A to Z Vehicle hire firm includes providing customers with wide range of vehicle hire services. Hence, mission of the firm is to become the foremost and leading hire firm in the region.
Thus, A to Z enables individuals to fulfil their needs by offering hiring services related to van, cars, lorries and minibuses. Company lays high level of emphasis on ensuring the aspect that vehicles are well maintained and properly serviced. Hence, A to Z offers hiring services to the customers according to their requirements. Besides this, such business organization ensures to the customer that services will be delivered on time at suitable place. In addition to this, for the maximization of customer satisfaction and loyalty such hiring company has employed polite and courteous staff. All these aspects clearly show that mission, objectives and strategies undertaken by A to Z are sound as well as in line with the strategic business environment.
Analysis And Evaluation Of Current System
Assessment of weaknesses
Weaknesses: There are many weaknesses of A to Z Vehicle Hire company which are creating trouble for the organization. That is why cited firm is unable to accomplish its objective. Cited firm records financial transactions effectively that supports the entity in reducing the complexity related to cash. But A to Z Vehicle Hire company is still having many drawbacks that impacts on the organization to great extent:
Poor accounting software
A to Z Vehicle Hire is working with old software that is why cited firm is unable to prepare the records in effective manner. Due to poor accounting software organization is unable to accomplish its objectives. That is creating trouble for the entity and it increases monitory complexity in the business units. Due to this, mistakes are increasing in the firm that creates problem in funds management in the workplace. There are many competitors of A to Z Vehicle Hire company those which are using advanced software in the organization so that they can manage their records in effective manner and can prepare the accounting report significantly. It helps them in analyzing the financial performance of the firm to great extent. But as A to Z Vehicle Hire is not using such advanced software and working with poor ac counting software thus, records are not recorded in effective manner that creates problems in analyzing the overall economic performance of the entity. Due to this cited firm unable to make effective investment decisions soon thus, profitability of the entity gets hampered due to this weakness.
Poor monitoring and review
It is another weakness in A to Z Vehicle Hire company due to this cited firm is unable to analyses the performance of the organization. Due to poor monitoring and reviewing company cannot analyze its financial transaction in effective manner that creates problem in future because due to this its decision may be go in wrong direction thus, cited firm will not be able to accomplish its objective effectively. It can create burden on the entity because due to poor monitoring mistakes will not be identified thus, organization will be unable to know the current standards and it will not be able to resolve its issue.
Poor knowledge and experiences of staff members
It is another major weakness of the A to Z Vehicle Hire is that its accounting team has not that much knowledge that are required for maintaining the records. They do not know about current revenue and tax policies; even they are not able to operate the new software effectively. From the case study of A to Z Vehicle Hire company it is found that Mo was not having any knowledge that whether he should register for value added tax or not. Due to insufficient knowledge and information they are unable to maintain the accounting records in effective manner as per the standards. That impacts negative on the organization and it may create complications of the entity in the future.
Delay in preparing the quarterly accounts
From the case study it is found that A to Z Vehicle Hire company has released the thing in the partner's meeting that quarterly accounts had not still prepared. That is the biggest drawback in the current accounting process of cited firm. Due to this overall financial performance of the cited firm cannot be measured by the authorities on time. That is why they are unable to make necessary changes in the system on time that creates negative impact on the business performance and decreases its profitability.
Manual wages system is ineffective and slow
It is another weakness of the entity due to this time and costing of the organization gets increased. That creates financial burden on the entity and decreases its profitability to great extent.
From the case study it is found that A to Z Vehicle Hire company has many weaknesses and it is required to make changes in the accounting system soon so that overall performance of the organization can be improved to great extent.
Issue- Ineffective manual wages system and poor knowledge of staff members
Recommendation- For resolving this accounting issues in the organization it is essential that A to Z Vehicle Hire company gives training to its staff members. By giving them training of preparing wages system on computers cited firm will be able to resolve this problem soon. Computerized preparation of records can be fast and effective because chances of mistakes are very low. Thus, training will resolve issue of wages system soon.
Issue- Poor accounting software
Recommendation- Software up gradation is the solution of this problem. Currently staff members of A to Z Vehicle Hire company are working on poor accounting software that is why cited firm is unable to match with the standards. It should install high level accounting software such as Sage 200 etc. It would help in improving efficiency of work practices and mistakes will be reduced soon.
Issue- Poor monitoring and review
Recommendation- It is the major problem in A to Z Vehicle Hires firm, for resolving this problem cited firm is required to conduct internal and external audit time to time. So that mistakes can be minimized and efficiency level of accounting records can be improved.
Issue- delay in preparing quarterly accounting records
Recommendation- For resolving this weakness, cited firm should segregate duties of all staff members. By this, people will realize their responsibilities and will fulfill those on time without any failure. Company should hire skilled accounts receivable assistant officer who can prepare the accounts on time.
Accounting system against ethical principles
Ethics are most essential part of business operations, it is all about doing the right think in order to run the business in ethical manner. It is the principle of accounting that to be fair and honest. It is necessary for the entity that to follow all instruction in effective manner and never breach any law. It is essential principle of accounting system is that to maintain confidentiality and integrity in the organization. It is necessary for A to Z Vehicle Hire company that to care the data properly.
Actual breaches of professional ethics in the organization
One of the main ethical principle is that to have professional competence and due care. But staff members of A to Z Vehicle Hire company was not having sufficient knowledge about accounting software and they are not aware with tax policies as well. It is the duty of company is that to maintain professional knowledge and increase level of skills of its workers those who are working in the accounting department. But employees of cited firm were not having knowledge and experience of accounting software and current standards. That is breach of ethical principle which is not acceptable in the organizations.
Confidentiality is the major ethical principal which is necessary to maintain by the corporation. In A to Z Vehicle Hire company employees were misusing the internet which was illegal and unethical. Access of unauthorized website is not ethical and it is consider as breach of law under the accounting system. There is risk that people can pass the confidential detail of the company to others which can create trouble for the organization. There were many people those who are doing the same that is breach of law and against the ethical principle.
It is necessary for the organization that to maintain integrity in the accounting system. It was found that Peter has told the Chandra that to use the last year account and increase figures. They have increased 80% gross income and has makes changes in net profit as well. It was fraud and unethical. Changes in management accounts in order to show more profit is completely wrong and this is termed as breach of integrity. That can cause trouble to the entity if bank trap the fraud that can harm the brand reputation and it may be possible that bank will not grant loans to the organization.
Professional behavior is another major ethical principle which was breached in A to Z Vehicle Hire company. It was noticed that staff are not taking their responsibilities seriously and they have not prepared quarterly accounts on time. This is wrong attitude and it is not professional behavior. Due to this cited firm fails to measures its performance and it can not take action for increasing its profitability.
Security of accounting records and use of ineffectual accounting software
Cited case situation shows that in the business unit unacceptable use of internet increased to the significant level as compared to the prior times. From the analysis of case situation it has been assessed that employees are spending their huge amount of time in sending discriminatory messages to others. In addition to this, employees also post anything on internet which in turn places direct impact on the image of business unit. Further, it has been found that personnel are involved in sharing confidential information to others. In A to Z alteration practices in the cash book also inclined to a great extent. Hence, it is recommended to make use of highly effectual software or system such as My SQL. This system will impose following cost and offers below mentioned benefits to the firm such as:
Cost analysis: For operating My SQL A to Z requires highly competent and skilled personnel. Moreover, My SQL is based on programming language so every personnel do not have ability to operate the same in an effectual way. Thus, firm is required to organize training for developing familiarity among the individuals about the advanced features of MY SQL. Moreover, without having proper knowledge about MY SQL personnel would not become able to deal with the same more efficiently. In this, requirements in relation to training aspect impose cost in front of firm and there by affects financial aspects of firm. Besides this, individuals within the firm also have to devote their time in the training aspects which in turn closely influences their productivity aspect. Hence, all such aspects clearly show that My SQL system has significant cost to the firm. However, cost level is less in against to the benefits which will be offered by MY SQL.
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Benefit analysis: Adoption of software such as My SQL will offer several benefits to A to Z which in turn directly makes contribution in the attainment of organizational goals and objectives. Moreover, for operating My SQL there is no requirement of internet connection which is one the main effectual aspect of it. Moreover, one of the main issues within A to Z is that employees are making misuse of internet services. Thus, use of MY SQL will overcome the issue in relation to misuse of internet to a great extent. In addition to this, MY SQL software offers high level security to the business unit because such cannot be accessed by unauthorized individual. Thus, MY SQL will reduce undesirable accounting and hacking related practices to the significant level.
Issue 2: Lack of effective monitoring and review
Solution: For proper monitoring and review of performance it is highly required for conduct internal audit on a periodical basis. This in turn clearly indicates the areas that require effectual control.
Cost: For organizing internal audit efficient personnel of management team has to devote their valuable time in making evaluation of business practices. Thus, such aspect closely influences the productivity of the personnel involved in internal audit team.
Benefits: By conducting internal audit A to Z can assess the deficiencies which take place in the accounting records. Thus, by making evaluation of accounts in against to voucher business unit can get idea about the fraudulent activities and thereby would become able to take corrective actions for improvement. In this way, effectual control can be exerted by A to Z on undesirable practices.
Issue 3: Delay in the preparation of quarterly accounts
- Solution: By appointing personnel with level 2 diploma and 3 as well as 4 in accounting (AAT)
- Cost: Recruitment of new accounting technician will impose cost in front of A to Z to some extent.
- Benefit: A to Z will enjoy high level of benefits by appointing skilled and experienced accounting personnel. Moreover, experienced individuals have ability to prepare accounts on time with the high level of accuracy. Hence, by preparing quarterly accounts within the suitable time frame A to Z.
Issue 4: Slow manual wage system
- Solution: Automation in the recording aspect or use of computerized system while preparing pay slips
- Cost: If business entity of A to Z will make use of software for the assessment and preparation of pay slip then it may result into cost to the entity. Moreover, installation charges impose high cost in front of firm. In addition to this, for developing skills of personnel in relation to operating software company has to conduct training and development session. Such aspect also has cost to the company because arrangements in relation to training requires more resources.
- Benefit: Cost control is one of the main benefits that will be attained by A to Z in the case of the adoption of computerized software. Moreover, case study reveals that use of computerized system helps in avoiding the cost of printed payslips such as £20 for a box. Thus, profitability can be enhanced by A to Z through the means of automation. Moreover, software installation has one time cost for the firm and offers benefit to a great extent.