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

Value of accounting information, Value of accounting information When a...

Value of accounting information When assessing value of accounting information we are confronted with similar problems. Provision of accounting information can be very expensiv

Accounting for lease, what are the concept of economic substance over legal...

what are the concept of economic substance over legal form under accounting for lease?

Finance management, Establish a budget and allocate funds in accordance wit...

Establish a budget and allocate funds in accordance with statutory and organisational requirements

Preference share capital in subsidiary-group accounts, Preference share cap...

Preference share capital in subsidiary (irredeemable) Investment in preference shares does not lead to ownership and therefore, if the holding company owns part of the preference

Changes in accounting estimates-financial statement, Changes in accounting ...

Changes in accounting estimates In preparing financial statements, it may be difficult to arrive at exact values for certain items to be presented in the financial statements and

What two components are used to compute the return on assets, What two comp...

What two components are used to compute the return on assets ?

Account, list and explain the stages where the errors are deducted for rect...

list and explain the stages where the errors are deducted for rectification.

Annual coupon payment, Arnot International's bonds have a present market pr...

Arnot International's bonds have a present market price of $1,250. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may

Presumption of survivorship, PRESUMPTION OF SURVIVORSHIP Where two or m...

PRESUMPTION OF SURVIVORSHIP Where two or more persons have died in circumstances rendering it uncertain which of them survived the other or others, the deaths shall, for all pu

Balance sheet trading profit and loss, on 31.12.2001 the following trail ba...

on 31.12.2001 the following trail balance sheet was prepared from the book of raju debit credit sundry debators 50,ooo - sundry creditors -

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