Review The Robatellis Pizzeria Case Study For Intern Develop
Reviewtherobatellis Pizzeria Case Studydevelopanother Internal Contr
Review the Robatelli's Pizzeria Case Study. Develop another internal controls system, but this time, in the purchases and fixed assets business areas. Prepare a 12- to 16-slide presentation describing the purchases and fixed assets business areas. Include any associated risk in these areas. Describe specific internal controls that include authorization of transactions, segregation of duties, adequate records and documentation, security of assets, and independent checks and reconciliation for each business area.
Paper For Above instruction
Introduction
The implementation of effective internal controls is vital for ensuring the integrity, accuracy, and security of business operations. In the case of Robatelli’s Pizzeria, an existing internal control system has been evaluated, and a new set of controls focusing on the purchases and fixed assets business areas have been developed. These areas are particularly susceptible to specific risks such as theft, fraud, misappropriation of assets, and errors in record-keeping. This paper discusses the nature of these business areas, the associated risks, and proposes robust internal controls to mitigate these risks, ensuring operational efficiency and safeguarding assets.
The Purchases Business Area
The purchases department is responsible for acquiring goods, ingredients, supplies, and other materials necessary for restaurant operations. This area involves processes such as supplier selection, purchase order issuance, receipt of goods, and payment processing. The main risks in this area include fraudulent purchase orders, unauthorized procurement, embezzlement of funds, receiving goods of inferior quality, and duplicate payments.
Risks in Purchases Area
- Unauthorized purchases or over-ordering.
- Fictitious or inflated invoices.
- Payment for goods not received.
- Collusion between employees and suppliers.
- Lack of proper documentation leading to untraceable transactions.
Internal Controls in Purchases
- Authorization of Transactions: All purchase requisitions and orders should require approval from a designated manager or purchasing authority to prevent unauthorized procurement.
- Segregation of Duties: Ensure responsibility for requisition, approval, receipt, and payment are assigned to different personnel to reduce the risk of fraud.
- Records and Documentation: Maintain detailed records of purchase orders, receiving reports, and invoices. Use standardized forms to ensure consistency and completeness.
- Security of Assets: Store purchased goods securely with restricted access, and conduct regular inventory counts.
- Independent Checks/Reconciliation: Periodically compare purchase orders, receiving reports against supplier invoices and payments to detect discrepancies.
The Fixed Assets Business Area
The fixed assets department manages the acquisition, recording, depreciation, and disposal of long-term assets such as kitchen equipment, furniture, and vehicles. Proper controls are essential to prevent theft, misappropriation, and inaccurate asset records. Risks include theft, unauthorized disposals, inaccurate records, and improper capitalization.
Risks in Fixed Assets Area
- Theft or misappropriation of assets.
- Unauthorized disposal or sale.
- Incorrect recording of asset values.
- Lack of timely and accurate updates to asset register.
- Inadequate physical security.
Internal Controls in Fixed Assets
- Authorization of Transactions: Acquisition and disposal of fixed assets should be authorized by senior management based on documented requests or approvals.
- Segregation of Duties: Assign responsibilities so that different personnel handle asset acquisition, record keeping, and physical custody.
- Records and Documentation: Maintain detailed asset registers including purchase date, cost, location, serial numbers, and depreciation data. Use asset tags or barcodes for tracking.
- Security of Assets: Store fixed assets in secure locations with restricted access, and install security measures such as cameras or alarm systems.
- Independent Checks/Reconciliation: Conduct periodic physical audits to reconcile assets with the asset register, and review depreciation calculations for accuracy.
Conclusion
Robatelli’s Pizzeria can improve its operational security and accuracy by implementing robust internal control systems in the purchases and fixed assets areas. Proper authorization, segregation of duties, accurate records, physical security, and independent reconciliation are key control components that help mitigate associated risks. Establishing these controls will enhance accountability, prevent fraud, and ensure the reliable reporting of financial and operational information. Continuous monitoring and periodic reviews of these controls are essential to adapt to emerging risks and maintain effective governance.
References
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