Accounting Information System Fruito Case Study

Question: Discuss about theAccounting Information Systemfor Fruitos Case Study. Answer: Introduction: This report is commissioned to examine the Fruitos case study. This company is basically a grocery store which is retailing and wholesaling the fruits and vegetables. This report is written to the CFO of Fruito for letting him know about all the accounting risk Fruito can face in future or currently facing. In first section, the study has been done on all the risks Fruito might face. This study is done in the concern of CFO of fruito. This section is focusing on all the risk. In second section, the study has been done on all the potential impact of risk, analyzed before, on Fruito. It has been studied that how all these risk will affect the fruito. In third section, the study has been done on some recommendation, which will help Fruito to implement some internal control. The last section is describing about how the risk can be mitigated at Fruito. Thus this study is revealing about accounts payable part of accounting. Risk while Ordering and Receiving the Stock: While ordering the stock for fruito, I have analyzed that there are so many risk which store might face. The research and audit on Fruito shows that there are lots of risk Fruito is facing or may be face in future. This report is written to you for your concern towards these risks. While the store make an order the credit risk increases of the store, as store do not make full payment of all goods. The risk of liquidity is always faced by the store because the debtors dont make timely payment and sometimes the perishable goods get destroy. The state of fruits and vegetable become change and thus retailers and customer dont show their interest to buy that products (Biddle, Hilary, 2006). Marketing risk can also be faced by Fruito. Making an order is the biggest issue because store maintain department send the list of goods which have to be order at the time when goods in the store finishes. And it took time to a supplier to send the goods. Potential Impact of Risk: The above risk might make many problems and issues for the store as these all risk can be raise at any time. Credit risk impacts on the store by decreasing the credit points and thus market dont give the credit and loan (Bartov Mohanram, 2004). Liquidity risk is related to liquid state of Fruito. If company dont have enough quick assets in a counting period, it becomes tough for the company to operate its business well. Market risk is related to interest rate risk, equity risk, commodity risk and currency risk (Larcker, Richardson and Tun, 2007). Fruito can face interest rate and commodity risk as the commodity price can be increase at any time and interest rate can be changed in the market at any time. Other factors of risk can be implementing the Fruito legally or technically (Dechow Skinner, 2000). Thus a proper step must be taken by Fruito to overcome these risks and expand its market and customer base. Recommendation for Implementing Internal Control: All these risks and their impact will affect negatively to the Fruito and its entire departments and operations. Fruito can implement following techniques to implement internal control. Fruito must create a separate team for risk management and plan a new strategy to overcome old problems and figure out new risk and implement solution to finish it. Fruito need to refine its control process and update its document again. It must build off all the work, it is currently doing (Ewert Wagenhofer, 2005). Fruitos all department need to pay attention on the all point of focus. IT role is quite important for Fruito it must be focused and updated according to new technology time to time. Fruito always try to look up for added value. Hence, by applying the internal control mentioned above, fruito can mitigate the risk, it is currently facing and might face in future. Mitigation of Risk: The risk can be mitigated by Fruito by Taking concern of all the aspect related to order and deliver the fruits and vegetables. The risk mitigation is quite important for Fruito because if Fruito will not control on its risk now, then in future Fruito will lose all its competitive advantage and the market share will be grab by any other competitor in the industry (Bonner, Hastie, Sprinkle Young, 2000). The best supplier must be chose in the industry and make a deal with him o supply the goods with all the preservation that no good can be destroy in the mid way and be the fresh as well. While supplier selection process the organization must keep in the mind best quality in cheaper rate concept (Schipper, 2003). Fruito must always maintain the idle quick asset ratio, so the liquidity risk can be overcome. Fruito need to analyze the market timely and take a loan from the market according to that so that no risk can pop up at any time. Fruito need to take a help of its risk management team to mitigate all the risk which can be occur at any time. Fruito can change its policies according to the risk management team to mitigate and overcome the entire problem (Chen Yuan, 2004). Technology can also help the Fruito to mitigate all the risk. Conclusion: After studying many books, published articles, journals, newspaper and this case carefully, it can be concluded that Accounts payable is facing many problem at Fruito. As there is no proper planning for this department. People of this department are not focusing on each and every element of accounts and Fruito. This case study is revealing the part of accounts payable at Fruito. It can be concluded after doing auditing, analysis and a proper study on accounts payable, that accounts department plays a crucial role in every organization. The part of accounting is the key part of any organization because this department helps the organization to control on other department and spending the financial source very efficiently and effectively. References: Bartov, E., Mohanram, P. (2004). Private information, earnings manipulations, and executive stock-option exercises. The Accounting Review, 79(4), 889-920. Biddle, G. C., Hilary, G. (2006). Accounting quality and firm-level capital investment. The Accounting Review, 81(5), 963-982. Bonner, S. E., Hastie, R., Sprinkle, G. B., Young, S. M. (2000). A review of the effects of financial incentives on performance in laboratory tasks: Implications for management accounting. Journal of Management Accounting Research, 12(1), 19-64. Chen, K. C., Yuan, H. (2004). Earnings management and capital resource allocation: Evidence from China's accounting-based regulation of rights issues. The Accounting Review, 79(3), 645-665. Dechow, P. M., Skinner, D. J. (2000). Earnings management: Reconciling the views of accounting academics, practitioners, and regulators. Accounting horizons, 14(2), 235-250. Ewert, R., Wagenhofer, A. (2005). Economic effects of tightening accounting standards to restrict earnings management. The Accounting Review, 80(4), 1101-1124. Larcker, D.F., Richardson, S.A. and Tuna, I., 2007. Corporate governance, accounting outcomes, and organizational performance. The Accounting Review, 82(4), pp.963-1008. Schipper, K. (2003). Principles-based accounting standards. Accounting horizons, 17(1), 61-72.