The directors of IDEA Limited have approached your forensic accounting firm, Griffith Accountants, for assistance. IDEA is based in Sydney, Australia and sells custom made engineering software packages to countries all over the world. The end of this financial year (31/12/2008) has shown a significant increase in bad debts written off and it has impacted severely on net profit. The Directors are very surprised; as an internal audit review conduced during the year reported controls over granting of credit were very effective. The shortened version of the internal audit report, which was presented to the board, did not say how many countries were tested, etc.
Each country is run by a national manager who is ultimately responsible for all dealings therein. At the end of each year, each country manager gets a bonus based upon gross turnover.
The directors of IDEA Ltd. Have therefore made available to you two files:
- A file of all customers and their credit limits at the year-end (31/12/2008), Customer-Database1.1MD; and
- A file of all outstanding invoices as at 31/12/2008. Sorted-Database1.1MD.
Due to the extremely confidential nature of their business, clients, products etc. the Directors will not release any more information to you. They want a report detailing the following factors:
- Whether or not any individual customers have exceeded their credit limits;
- A list of countries where this has been allowed to happen, and what percentages of clients in those countries have exceeded their limits;
- A list of countries, where the managers have been scrupulous and no errors have occurred; and finally
- Any indication from you as to why these policy breaches happened and how they could be prevented in future.
Write a brief report to the directors answering their four queries above. The report should just be a 2 page summary (in Word), professionally presented and backed up by appendices which should include all the printouts (using IDEA software) you used to support your findings/recommendations.