CHIC PAINTS LTD

Chic Paints Ltd - Case Study

[Name of the Institute]

Chic Paints Ltd - Case Study

Introduction

Chic Paints Ltd (CPL) was previously a part of the Ashstead Plc before it was subject to Management Buyout (MBO) by five of their directors. The company, in order to reduce their start up expenses, relied basically on excels sheets to record their financial data, instead of relying on any software. CLP faces a lot of internal problems, as well as some issues with their policies and with their creditors and debtors, both. In this report, a critical analysis of the company's internal control system and the accounting system will be carried out, identifying the main set of problem that the company faces. In the end, recommendations will be followed regarding the advances that the company's board of directors might consider to improve the current system, which according to the facts, is completely out dated.

Analysis of the Company's Current System

Use of Excel Sheets

At the time of the MBO, the financial accounting system was a part of the IT system of the Ashstead Plc, and therefore was decided to be replaced immediately. However, for the ease of installation, and probably for it's low costs, the company decided to use Microsoft Excel Spreadsheet, bearing an opportunity cost of having installed a highly integrated and advanced financial accounting software that would minimize errors, and most importantly fraud (Keller & Owens, 2011).

Excel spreadsheets is able to do a large number of accounting tasks, is widely used in the business world and is easily available, but face the facts, Excel spreadsheets are not the perfect tool for accounting (Xero, 2014), yet alone, allowing the entire CPL to be Excel based rather than installing a accounting software is prone to error and fraudulent activities. Manipulating excel spreadsheets as compared to any software is comparatively easier and to some extent undetectable. Although Excel is cheaper, but in the end, it's more expensive if the company undergoes and experiences fraudulent activities on behalf of their employees. Like the case that occurred during the month of May 2013, in which Alf Wright, the departmental manager, was the suspect.

Similarly, the use of Excel spread sheets is a lot time consuming, and to record all the financial data of the entire company needs a lot of brainstorming. Thus, at the end of the financial year, when the companies are required to produce their financial statement, CPL faced serious problems in June 2013. Having the entire data of the company and record financial data on Excel spreadsheets is also disadvantageous in terms of backing up the data, which needs to be done twice a day only. This may cause disruption in the records when faced with a serious issue like the one that the company faced during April 2013, when the company was a victim of power cut due to fallen electricity wires.

Work Load

The company faces a serious issue when it comes to workload. The company has insufficient staff members to execute all jobs without putting any ...