What factors in preview company''s control environment, Financial Accounting

Assignment Help:

WILL SOMEONE PLEASE ASSIST ME WITH THIS ASSISGNMENT
Preview Company, a diversified manufacturer, has five divisions that operate throughout the United States and Mexico. Preview has historically allowed its divisions to operate autonomously; corporate intervention occurred only when planned results were not obtained. Corporate management has high integrity, but the board of directors and audit committee are not very active. Preview has a policy of hiring competent people. The company has a code of conduct, but employee compensation packages depend highly on performance. Preview Company does not have an internal audit department and it relies on your firm to review the controls in each division.

Chip Harris is the general manager of the Fabricator Division. The fabricator Division produces a variety of standardized parts for small appliances. Harris has been the general manager for the last seven years and each year he has been able to improve the profitability of the Division. Much of the improvement in the profitability has come through aggressive cost cutting, including substantial price reductions in control activities over inventory

During last year, a new competitor has entered Fabricator's markets and has offered substantial price reductions in order to grab market share. Harry has responded to the competitor's actions by matching the price cuts in the hope of maintaining market share. Harry is very concerned because he cannot see any other areas where costs can be reduced so that the division's growth and profitability can be maintained. If profitability is not maintained, his salary and bonus will be reduced. Harris decided that one way to make the division more profitable is to manipulate inventory because it represents a large amount of the division's balance sheet. He also knows that controls over inventory are weak. He views this inventory manipulation as a short - run solution to the profit decline due to the competitor's price cutting. Harris is certain that once the competitor stops cutting prices or goes bankrupt, the misstatements in inventory can be corrected with little impact on the bottom line.
REQIURED:
A. A. Evaluate the strengths and weaknesses of preview Company's control environment

B. What factors in Preview company's control environment have led to and facilitated Harris‘s manipulation of inventory

 


Related Discussions:- What factors in preview company''s control environment

Small bankruptcies-bankruptcy and liquidation, SMALL BANKRUPTCIES The c...

SMALL BANKRUPTCIES The court may order the estate of a debtor to be administered summarily, if the debtor's assets are not likely to exceed Shs 12,000 in value.  This is known

Discuss the pros and cons of financing in unhedged, You have the following ...

You have the following information about rates in London for Eurocurrency loans of one-year duration, the exchange rate between the USD and euros, the currency in which you want fi

Determine the net worth of personal assets, Igor and Angela were married in...

Igor and Angela were married in 2005, separated in 2011, and divorced recently. At the time of marriage, each had some investments and personal assets. They both worked during the

Example on financial and managerial accounting, Mr N. M. is lucky to have a...

Mr N. M. is lucky to have a lottery prize of Rs 20 million. He does not have any liability and does not have any claimant over this money. He has the following alternatives: (i)

Primary business activities - capital resources, Create a description of yo...

Create a description of your company and its primary business activities. Include: a) A brief historical summary b) The lines of business the firm is engaged in (Is the compa

Fiscal policy , Fiscal Policy In a democracy, elected officials of the...

Fiscal Policy In a democracy, elected officials of the government create programs for the general welfare of the population. To pay for these programs, the government taxes in

Determine current stock price & current dividend of company, 1. Select a pu...

1. Select a publicly traded company (preferably manufacturing oriented; do not use a financial services company such as a bank or a bank holding company) and obtain a copy of their

Calculate the operating cash flow, You are evaluating a project which costs...

You are evaluating a project which costs $720,000, has a four-year life, and no salvage value. Depreciation is straight-line and the half year rule does not apply. Sales are projec

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd