Accounting Information System of Fruito

Question: Discuss about the Accounting Information System of Fruito. Answer: Organizational Process: The organization is engaged in the business of procurement of the products in the form of vegetables and fruits from domestic as well as overseas vendors to cater the service of selling them to the people of the local community. Fruito has its own retail outlet through which it sells the products to the people. Moreover Fruit is engaged in some institutional clients like hotels and restaurants. The procurement is made from the local vendors for the products available in local market. For some special products, Fruito has its overseas vendors who use to supply the products as per orders placed. The sales of the products are done through retail outlet which is contributing most of the business. The business also includes serving the institutional customers like hotels and restaurants who are purchasing the products with annual contract. The main feature of this business is to carry on with the risks of the business which is needed to be looked into with proper application of Accounting Information System to mitigate them. Basic purpose of my effort is to detect the risks related to inventories along with the respective internal controls to mitigate them(Simplilearn, 2012). A report with detailed detection of probable risks and respective internal controls to mitigate them will be done by me with subsequent submission to the CFO of Fruito for his consideration and necessary adoption. Following discussion will highlight these issues: Risks: Demand of the Product Product demand is the risk which is generated as per the buying habit of the customers. This risk is important as the changing of buying habits can make loss of revenue and wastage of working capital as the products dealt with are of perishable in nature(Frc, 2014). Quality of product Quality of product is another major risk as this leads to reduction in customers if quality fails for the product sole. This risk will immediately make impact on the sales of the organization and cause huge reduction of revenue(Educba, 2016). Selection of vendors As the company is engaged in trading business, it has to depend upon the products which are supplied by vendors. The credential of vendors is major risk as the products procured from them will be so0ld by the company through its own entity(Shacklett, 2013). Selection of products Selection of products is major risk as the products with good circulation are to be prioritized instead of odd products which are not sold in regular rotation. Receipt of products When the products are delivered to the company, major risk generates from the difference between ordered and delivered products. If such difference happens, it is always making loss to the organization(Simplilearn, 2012). Maintenance of inventory As the products are of perishable in nature, maintenance of inventory poses major threat to the business. The prefixed norms related to maintenance of inventory will assure better result so far damage is concerned. Spoilage of inventory This risk is generated because of the nature of the products and affects working capital of the company with subsequent impact not serving the customers with their requirement. Mitigating the risk through internal control Risk of demand of the product This can be avoided with proper identification of the demand of the customer through proper market survey, and analysis of the demographic feature of the community. The ultimate objective is to find out the food choice of the customers and detection of necessary ingredients to entertain that food habit in the form of fruits and vegetables(Infotech, 2011). Risk of product quality This risk can be mitigated with fixation of standard of products to be procured from the vendors. For this purpose the commonly acceptable standard can be adopted as specified by specified authorities. Risk of vendor selection This risk can be avoided with proper feedback of the vendors from the market with accredited TQM parameter. The vendors with ISO certification should be choice by priority. For local vendors, available market credential should be first priority to judge their ability about the qualitative and quantitative criterion to be ensured(Shacklett, 2013). Risk of selection of product Product selection risk can be mitigated through internal control of proper analysis of historic data of products been sold. This exercise can infer about the nature of products so far its movement is concerned. Fast moving products should be emphasized with high importance, while other products are too prioritized as per turnover(Hall, 2015). Risk of receipt of products To mitigate this risk physical involvement in the forms of verification of type of product with quality is to be considered first. The dispatched goods should be with fresh and saleable in nature and that can ensured through physical verification only. Risk of inventory maintenance The inventories of fruits and vegetables are to be kept in proper sustainable temperature to ensure their long life while it is stored. There are specific life spans of each product as per temperature requirement and accordingly action is to be initiated to comply with that criterion for long and efficient life of the product(Hamlett, 2016). Risk of spoilage This risk occurs with the manhandling of inventories and not complying with the pre-fixed norms of storing the products. To mitigate this risk, high level of technological involvement is necessary along with rotation of products through shelf display and maintenance of FIFO method of stock management is necessary. The reordering level of products should be effectively practiced to mitigate this risk also. Summary to CFO As per the observations detected through internal audit done by me on the ground of finding out probable risks and mitigating them, above report has been furnished. This report emphasizes on the issues of different risk factors out of which quality control, detection of food habit of the community and proper maintenance of inventories are main risks. These risks can be mitigated through the helpful interference of Accounting information System or AIS. AIS can contribute with historical data to find out sales trend which can determine the purchasing habit of the community. Even the role of AIS can be important in the areas of ordering, and inventory maintenance too. Hence AI can contribute with value addition in this aspect to make the company generating more revenue and subsequent profit for Fruito. References: Busch, J. (2013). Supply Risk Management: Exploring Demand Risk. Retrieved December 14, 2016, from https://spendmatters.com/2013/12/03/supply-risk-management-exploring-demand-risk/ Educba. (2016, May 16). The 8 Crucial TQM Elements for TQM's Success. Retrieved November 12, 2016, from Educba: https://www.educba.com/the-8-crucial-tqm-elements/ Frc. (2014). Guidance on Risk Management, Internal Control and Related Financial and Business Reporting. Retrieved December 14, 2016, from https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/Guidance-on-Risk-Management,-Internal-Control-and.pdf Hall, B. (2015). How to Use Internal Controls to Mitigate Risk Prevent Profit Loss. Retrieved December 14, 2016, from https://www.biggerpockets.com/renewsblog/2015/06/21/internal-controls-mitigate-risk/ Hamlett, K. (2016). Inventory Control Risk. Retrieved December 15, 2016, from Chron: https://smallbusiness.chron.com/inventory-control-risk-2225.html Infotech. (2011). Mitigate Internal Risks Achieve Compliance with Internal Controls. Retrieved December 14, 2016, from https://www.infotech.com/research/ss/it-adopt-a-framework-for-internal-it-controls Johnston, R. (2011). Mitigating the Risk of Fraud and Theft. Retrieved December 14, 2016, from https://www.aicpastore.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2011/CPA/Aug/FraudTheft.jsp Shacklett, M. (2013). 10 ways to reduce your risks in buying decisions and vendor selection. Retrieved December 14, 2016, from https://www.techrepublic.com/blog/10-things/ten-ways-to-reduce-your-risks-in-buying-decisions-and-vendor-selection/ Simplilearn. (2012, July 07). Enterprise Environmental Factors Organizational Process Assets: Importance in Project Management. Retrieved December 15, 2016, from Simplilearn: https://www.simplilearn.com/enterprise-environmental-factors-organizational-process-assets-article