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The document discusses FTW Corporation's inventory management and financial processes. It identifies potential issues such as reliance on individual purchasing agents' discretion and lack of proper documentation and control in invoice matching and payment. An operations audit evaluating effectiveness, efficiency, controls, and compliance could help optimize operations and address weaknesses.

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Emilou Suarez
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19 views2 pages

CA1

The document discusses FTW Corporation's inventory management and financial processes. It identifies potential issues such as reliance on individual purchasing agents' discretion and lack of proper documentation and control in invoice matching and payment. An operations audit evaluating effectiveness, efficiency, controls, and compliance could help optimize operations and address weaknesses.

Uploaded by

Emilou Suarez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Name: Suarez, Emilou T.

Section: BSA-3A

FTW Corporation sells computer peripherals and related devices such as printers, ink, flash drives and
cables. FTW has a staff of 3 purchasing agents, each of whom oversees a specific set of inventory items.
Each purchasing agent uses his/her discretion in making decisions about when to order inventory, how
much inventory to order and which vendor to purchase from. When ordered inventory arrives at FTW,
one of two receiving clerks matches the items, quantities, and vendors against a copy of the purchase
order, then either stocks merchandise on the shelves or puts it in the storeroom. FTW’s accountant
receives a copy of the invoice from the vendor, as well as an email from one of the receiving clerks
indicating that merchandise has been received. The email also includes the relevant purchase order
number. The accountant files the invoice date in a filing cabinet; once a week, the accountant removes
invoices from the filing cabinet and pays them by check. To cut down on clutter in the office, the
accountant shreds the vendor invoice after the check has been paid by the bank. The accountant also
completes a bank reconciliation within two weeks of receiving the bank statement in the mail.

Requirements:

1. Upon reading the case, discuss the need of an operations audit.


Based on the case above, an operations audit is definitely needed for FTW Corporation since the
company relies on the discretion of individual purchasing agents, which may lead to
inconsistencies in ordering inventory. Additionally, the process of matching items and paying
invoices seems to lack proper documentation and control. An operations audit can help identify
any gaps, weaknesses or inefficiencies in these processes, ensuring better inventory
management, accurate record-keeping, and improved financial controls. The application of an
operations audit is a great way to optimize operations and enhance overall efficiency.

2. Integrate the concept of 7 E’s of Operations Audit, as applicable to identify potential problems
in the case.
By conducting an operations audit with a focus on these 7 E's, FTW Corporation can identify
weaknesses, implement necessary improvements, and optimize their operations for better
inventory management, financial control, overall performance, and can help in identifying
potential problems in the case:

1. Effectiveness: The audit will determine whether the current procedures are producing the
expected results, which include accurate item matching, timely vendor payment, and timely
inventory replenishment.
2. Efficiency: The audit will evaluate the efficiency of the purchasing process, including the
decision-making of purchasing agents, to identify areas for improvement that can simplify
operations.
3. Excellence: The audit will focus on maintaining high quality standards in inventory
management, record-keeping, and vendor relationships to ensure that FTW Corporation
continually provides good products and services to its customers.
4. Ecology: The audit will consider the environmental impact of FTW Corporation's operations,
such as waste management practices, energy consumption, and sustainability efforts.
5. Equity: The audit will assess fairness and equity in vendor selection, pricing negotiations, and
payment processes to ensure that FTW Corporation maintains ethical business practices.
6. Economy: The audit will review the financial controls in place, including bank reconciliations,
invoice filing, and payment procedures, to identify any potential areas of financial waste or
inefficiency.
7. Ethics: The audit will examine the ethical practices of FTW Corporation, ensuring compliance
with relevant laws and regulations, as well as ethical standards in vendor relationships,
employee treatment, and financial management.

3. As an internal auditor, what are the skills and qualities you need to have an effective audit and
resolve the problems encountered?
In order to have an effective audit, an internal auditor must possess the following skills and
qualities:
Technical Skills: Knowledge of accounting principles, internal controls, and inventory
management best practices. Analytical skills include the capacity to recognize trends, evaluate
data, and discover areas for improvement. Communication Skills: The capacity to effectively
communicate findings and recommendations to management and employees. Interpersonal
Skills: The capacity to establish relationships with employees at all levels and secure their
cooperation during the audit. Objectivity is the ability to maintain an unbiased perspective while
avoiding conflicts of interest. Problem-Solving Skills: The capacity to recognize the underlying
cause of an issue and devise practical solutions.

4. Based on your proposed recommendations, as an internal auditor, how will you become a
trusted advisor and an effective consultant?
As an internal auditor, you must establish good relationships with your staff or team in order to
become a trusted advisor and successful consultant. You may establish yourself as a trusted
resource by actively listening to their concerns, sharing important ideas, and delivering practical
answers and solutions. Maintaining a professional and friendly tone will also encourage open
communication and collaboration. Also, by having a good communication skill, able to provide
value added insights, and providing timely and responsive support. Being a trusted counsel
requires being dependable, knowledgeable, and supportive.

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