Smackey Food

In: Business and Management

Submitted By ashleyg14
Words 2156
Pages 9
Introduction

My role at Smackey Dog Food is to apply the audit procedures and objectives to this company. A cursory examination reveals that there are many areas where Smackey's accounting practices can be improved. At times, there are faults with the techniques that are being used. At other times, there are faults just as much with the control systems. Inadequate control systems are often the cause of problems with a company's accounting practices, and ensuring that proper controls are in place is one of the most important roles of the auditor (CSU, 2009). In this analysis, the issues will be taken one at a time, and then some final overarching recommendations will be made to ensure that not only are these problems addressed but that systems are in place to ensure that there are no further problems.

Problem #1 – Waste and Margins

The one-serving packages that are freshly manufactured are sold at three times the price of their other products. Waste is an issue for this product, in part because of the necessity of using fresh ingredients. From a business perspective, Smackey can set its prices at whatever level it feels is appropriate for the market, but the company should have a sense of whether or not this product is making money. Thus, the company must be able to measure this waste in order to ensure that it makes money on this product. High waste is a symptom of poor controls. A management accounting system is recommended, for example contribution margin accounting, in order to determine whether this product generates profits. Waste must be included in the cost of goods sold. This will allow for a more effective breakeven analysis (Richards, 2012). It is worth considering that an essential component of good control is measurement. Right now the company does not know how much waste is associated with this product. There is evidence of…...

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