Wa Force Inventory Compliance Report
CBU’s new computer system for tracking and calculating inventory costs installed on January 1 overstates inventory by $1.0 million when compared with the physical inventory count performed at year-end closing, December 31.
An effective and timely system control coupled with an integrated computer based system and manual components for tracking and calculating inventory costs will reduce material discrepancies at year end closing. I agree with Accountant B who suggests that CBU accountants should develop a better system of control to prevent such material variance between the computerized system and the physical inventory count.
The computer system installed was fairly new therefore CBU accountants proceeded correctly when they followed the internal control procedures of a regular physical inventory count; nevertheless I can conclude that the count was not performed on a regular schedule from January to December, when considering the material discrepancy. Walters, Schmidt, and Newton (2006) state that the cycle counting methods used on a regular basis throughout the year will secure a high level of inventory accuracy. A better system of control is needed to prevent future costly errors because the physical inventory count performed at year-end is time consuming. The new computer system …show more content…
was not efficient enough to provide CBU with a reliable inventory report, thus the need for an Enterprise Resource Planning (ERP) to support the system by facilitating the function of CBU’s operations, retaining records of business event and storing data useful for decision making (Gelinas, Dull, & Wheeler, 2015). CBU may consider introducing one of the cycle counting processes and acquire the Sales
Force Automation (SFA) software which is part of the ERP systems to prevent such material misstatement of inventory in addition to the computer system installed.
The SFA software automates sales tasks such as inventory monitoring (Gelinas et al., 2015). A frequent performance of the chosen cycle counting process will reduce the inaccuracies, assist the accountants to discover reasons for the discrepancy instead of correcting it with an adjusting entry, and may eliminate the annual physical inventory count and provide timely and effective system control (Walters et al., 2006). It is essential to know the root cause of the error so that it can be avoided or minimize in the
future.
There is also the Enterprise Application Integration (EAI) which combines processes, software, standards, and hardware to link systems together and allowing them to act as one system. EAI will allow CBU to connect the new computer system to the SFA software for a more reliable inventory reporting at year-end. Proverbs 11:14 (NIRV) says: “Without the guidance of good leaders a nation falls. But many good advisers can save it.” Policies and procedures to manage the inventory developed by the CBU’s accountants and audit advisors is the guidance needed to avoid inaccuracies, and the costs that can be incurred due to discrepancies.
An effective and timely system control coupled with an integrated computer based system and manual components for tracking and calculating inventory costs will reduce material discrepancies at year end closing. I agree with Accountant B who suggests that CBU accountants should develop a better system of control to prevent such material variance between the computerized system and the physical inventory count.
The computer system installed was fairly new therefore CBU accountants proceeded correctly when they followed the internal control procedures of a regular physical inventory count; nevertheless I can conclude that the count was not performed on a regular schedule from January to December, when considering the material discrepancy. Walters, Schmidt, and Newton (2006) state that the cycle counting methods used on a regular basis throughout the year will secure a high level of inventory accuracy. A better system of control is needed to prevent future costly errors because the physical inventory count performed at year-end is time consuming. The new computer system …show more content…
was not efficient enough to provide CBU with a reliable inventory report, thus the need for an Enterprise Resource Planning (ERP) to support the system by facilitating the function of CBU’s operations, retaining records of business event and storing data useful for decision making (Gelinas, Dull, & Wheeler, 2015). CBU may consider introducing one of the cycle counting processes and acquire the Sales
Force Automation (SFA) software which is part of the ERP systems to prevent such material misstatement of inventory in addition to the computer system installed.
The SFA software automates sales tasks such as inventory monitoring (Gelinas et al., 2015). A frequent performance of the chosen cycle counting process will reduce the inaccuracies, assist the accountants to discover reasons for the discrepancy instead of correcting it with an adjusting entry, and may eliminate the annual physical inventory count and provide timely and effective system control (Walters et al., 2006). It is essential to know the root cause of the error so that it can be avoided or minimize in the
future.
There is also the Enterprise Application Integration (EAI) which combines processes, software, standards, and hardware to link systems together and allowing them to act as one system. EAI will allow CBU to connect the new computer system to the SFA software for a more reliable inventory reporting at year-end. Proverbs 11:14 (NIRV) says: “Without the guidance of good leaders a nation falls. But many good advisers can save it.” Policies and procedures to manage the inventory developed by the CBU’s accountants and audit advisors is the guidance needed to avoid inaccuracies, and the costs that can be incurred due to discrepancies.