The Concept of External Auditing - Essay Example

Auditing O’Leary’s Accounting and Inventory Management Systems Introduction External auditing is performed in order to identify the operational and strategic weaknesses and deficiencies which may elude the organizational participants of the particular company (Platts & Gregory, 1990). In this case, the company is called O’Leary that is primarily working to provide the customers with their orders through courier services. However, in more technical terms, the company is housing a trading business and it has one sales representative who is responsible for maintaining close relations with suppliers and customers respectively. The deficiencies in the system include having only one sales representative because it is quite a significant workload for an individual to manage both incoming and outgoing relations of the company. The incorporation of technology and Management Information System are a few requirements needed to be fulfilled in order to transform O’Leary into an effective organizational setup. The company is operating with a conventional approach in the era of unconventional business thinking (Hill & Swanson, 1994). The technological outlook of the company is extremely grim to say the least. The sales system must be modified in order to include e-forms which should be used for recording orders by the only sales representative of the firm. The e-forms are necessary because the company is a trading business and therefore, it is majorly concerned with enhancing customer satisfaction. The customers have the tendency to get notably satisfied when they see exceptional of organizational client processing (OFarrell & Moffat, 1995). Right now, O’Leary’s client processing speed is dull and it needs to be rejuvenated with the help of incorporating technology in the system which will allow the sales personnel to send fresh orders through handhelds while on the move and the warehouse can send the products without waiting for sales force to come back and report the new orders manually. Mr. Walsh on the other hand must shift his office to the warehouse in order to make himself capable of recording the transactions in the real time. The whole idea of the plan is to minimize the slack time between the organizational activities. The contemporary organizational philosophy is of the view that organization must keep on doing something all the time (Yan & Louis, 1999). The slack time in an organization creates a blind spot for the upper management. The creation of blind spot creates further difficulties for the management to evaluate and monitor the activities in the company. Mr. Walsh is also recommended to take the pain of doing his job seriously because he should record the invoice on a daily basis and it is necessary because if he records the invoices daily then his work will remain manageable and he will become less prone to committing errors and mistakes. Additionally, dispatch note is a source document of each order in the language of Accounting (Bricker, 1989) and it is obligatory to have one for each transaction because legal system demands it just in case something goes wrong. The client will demand the proof of the transaction in the court of law and electronic records have an ability to withstand the effects of time but piece of paper does not. In the light of above argument, the company is strongly guided to keep an electronic copy of dispatch notes which means increasing file space as well. Finally, Mr. Jones should remain vigilant in reminding the people who did not pay the company on a monthly basis because ninety days are too long. The constant reminder of debt is valuable for the company as it will expedite payments and it is also beneficial for the customers because as it reminds them about their financial obligations and in this way, it allows them to make needed arrangements in order to clear their debt. The access to the master file is restricted and only executive director can open it, this is absurd because it stands against everything for which modern organizational philosophy stands for. The director’s authority to make changes in the master file represents over-centralization of authority in the company. The abovementioned practice means that the top management of the company does not trust the employees. Instead, the organization should give partial access of master file to each department so that they can make relevant changes in it whereas; the electronic log should be maintained recording the names of those who accessed the file which will enable the leadership to investigate any irregularities in records. The printout of the master file must be kept along with electronic records and the executive must continue checking the data of underlying departments for spotting issues. The practice of presenting older non-payments to the director must be carried on but Mr. Jones should be given authority of warning the defaulters on his own because it will increase the efficiency of payment process. The company needs to trust its employees (Brien, 1998) because every important and valuable task is currently being performed by the director himself. Mr. Walsh surely qualifies to have sufficient authority in terms of deciding supplier payments and monthly expenses of the company and all director needs to do is to give each department partial access to the master file and then in free time, he may go through changes in the master file and upon spotting irregularities he has the option to call the relevant officer and discuss the matter in private. O’Leary is not a very big company and its operations are rather simplistic in nature and therefore, the management should introduce technology within the structure of the company in order to maintain check and balance in the day to day operations. The directorial level must maintain a portal which will give it access to each and every department’s data. The control mechanism will become more subtle in nature and it will also help in simplifying strategic decision making as well. The purchases are managed by only one person in the company and therefore, O’Leary needs more employees in marketing and sales department in order to cover more geographical area. Secondly, the wage system of the company is required to be dedicated to Mr. Walsh as he plays the role of middle management and because of this reason, he is well aware of employees’ efforts and he may be able to strike a balance between employees’ efforts and compensation so that participants should not experience psychological contract breach. Conclusion This paper has reviewed and analyzed the operational functionality of O’Leary and found that the company is doing quite well in the respective industry. However, the top management is not willing to trust the employees and therefore, it is not delegating authority to the lower organizational levels. The firm needs to incorporate mild level of technology in order to regulate the operations. The marketing and sales must be expanded regarding number of employees. Mr. Walsh and Jones must be given reasonable level of freedom while doing their jobs. The management must learn to trust the employees, if they are willing to see the company grow out of one geographical location. References Bricker, R. 1989. An Empirical Investigation of the Structure of Accounting Research. Journal of Accounting Research Vol 27 No.2 , 246-262. Brien, A. 1998. Professional Ethics and The Culture of Trust. Journal of Business Ethics Vol 71 (4) , 391-409. Hill, N. C., & Swanson, M. J. 1994. Sales Thchnology Applications: The Impact of Electronic Data Interchange on the Sales Function. Journal of Personal Selling & Sales Management Vol 14 No.3 , 79-87. OFarrell, P. N., & Moffat, L. A. 1995. Business Services and their Impact upon Client Performance: An Exploratory Interregional Analysis. Regional Studies Vol 29 No.5 , 111-124. Platts, K. W., & Gregory, M. J. 1990. Manufacturing Audit in the Process of Strategy Formulation. International Journal of Operations & Production Management Vol 10 No.9 , 5 - 26. Yan, A., & Louis, M. R. 1999. The Migration of Organizational Functions to the Work Unit Level: Buffering, Spanning, and Bringing Up Boundaries. Human Relations Vol 52 No.1 , 25-47. Read More