Category: Auditing

Phishing is a type of Internet fraud, the purpose of which is to gain access to confidential user data, such as logins and passwords. This type of fraudulent action is achieved by conducting mass mailings of emails on behalf of popular brands. The process also includes private messages within various services, for example, on behalf of banks or within social networks. The letter often contains a direct link to a site that is indistinguishable from the present or to a website with a redirect. After a user lands on a fake page, scammers try to induce the user to enter their login and password on a fake page with various psychological tricks. These cyber attackers mimic the user’s target to access a particular site, which allows scammers to access accounts and bank accounts. Phishing is one of the types of social engineering based on users not knowing the basics of network security. In particular, many do not know a simple fact: services do not send letters asking for their credentials, password, and other data.

Phishing in Auditing

It is important to understand the details of what phishing is dangerous for large enterprises and audit processes. For example, there is an enterprise where activities are associated with the sale of IT solutions and audit data (Xiong, Proctor, Yang, & Li, 2017). A certain employee holding a position in the company receives an email. The letter gives a link to the site of an enterprise that is already working with this organization, and the message itself contains a story about the latter.

The employee follows the link, gets to a site that is similar to the website the company works with. Next, he or she enters the username and password from the administrator account, and thus this username and password go to the attacker (Perrault, 2018). As a result, the attacker knows the password for the administrator account of the company that cooperates with the company of the employee. Perhaps in the process of following the link, if the employee’s PC is not protected by antivirus, a virus has come to the computer. In other words, the employees themselves are now a source of damage to another enterprise. Thereby this can lead to a violation of the consent of the two companies, large losses on both sides, as well as to the enrichment of the attacker.

The prevalent number of audit phishing attacks occur during audit planning. Audit planning is an obligatory stage of the audit, which consists of determining the audit strategy and tactics. It also includes the scope of the audit, drawing up a general audit plan, and developing an audit program and specific audit procedures. The auditor’s planning of his or her work helps ensure that important areas of the audit are given the necessary attention. In other words, potential problems are identified, and the work is done with optimal costs in a high-quality and timely manner (Vishwanath, Harrison, & Ng, 2018). Planning allows workers to effectively distribute the work among members of the group of specialists involved in the audit, as well as coordinate such work. The plan includes an in-depth study of client activities, assessing the likelihood of material misstatement in accounting and reporting, and organizing an effective audit.

Types of Phishing Attacks

One of the common types of audit phishing is when attackers create a fake website of a bank or financial institution identical to the official one. Then they do spam mailings, luring customers to a fake website, where they are asked to enter card details. Also, one of the types of phishing is a fraudulent online store. In most cases, prices in this store are significantly lower than market prices. Thus, by paying for purchases in such a store, an individual sends money directly to attackers. This method of fraud, unlike others, is widespread in recent times. Through phone calls, email newsletters, messages in instant messengers and social networks, scammers, under various pretexts, try to get data on the victim’s card. For example, under the guise of a special action or disguising oneself as a bank employee and scaring the victim with unauthorized transactions. The given situation supposedly can be prevented if a person immediately reports all the card details (Xiong, Proctor, Yang, & Li, 2019). Phishing can be represented as direct online contact with a scammer, as well as interaction with programmable bots or entire phishing sites.

Furthermore, there are instances where phishing in auditing can take the form of mirror websites. It’s also a type of phishing, which nevertheless can be put in a separate category due to its increased prevalence. The mirror site can duplicate the Internet bank of the issuing bank of a plastic card or an audit organization (Xiong et al., 2017). Such sites reproduce in detail the original banking and audit web platforms. However, the domain of the mirror site will not coincide with the banking one, and all the data will go to scammers in this way. In addition to site mirrors of banks and auditors, site mirrors of large online stores are also common. Having made purchases, as usual, the victim completes the order, pays it via the Internet, entering his or her card details, and payment for the purchase goes to scammers, and along with the money, all card data (Vishwanath et al., 2018). Attackers can be used for online payments without SMS verification, of which, fortunately, there are fewer and fewer ones, which complicates the life of scammers.

Auditing phishing is a type of fraud through which attackers obtain the personal information of a user of an organization or client, such as logins, passwords, and details of payment documents. Phishing can be spread via email, messaging applications, social and professional networks, and other high-traffic web resources. Phishing can be in the form of a hyperlink leading to a fake website where a client wants to enter the user’s personal data. It can also take the form of a malicious application that may contain the following functionality (Xiong et al., 2017). This process includes intercepting input characters from the keyboard, stealing passwords from the operating system and browsers, recording audio and video, transmitting personal information, and interacting with the attacker server. The biggest damage to phishing is in the financial sector, such as banking and auditing.

Prevention

At present, anti-phishing technologies based on heuristic algorithms and reputation databases are used. There are common heuristic technologies that are used to detect phishing links. For example, the primary protection against phishing in auditing can go through the IP address in the URL. Most legitimate web resources register a domain name, and phishers – cybercriminals who commit phishing attacks – often save on domain registration. As a result of this, on the phishing sites, instead of the domain, the IP address of the malicious web server is indicated in the URL (Xiong et al., 2019). In addition, in the URL, dots are used to indicate a subdomain. Attackers can create domains of the third level and higher in order to make the site address look legitimate. It is important to remember that scammers often use highly suspicious characters. Phishers use special characters in the domain name to trick an inattentive user. Often a person may notice special characters in a phishing page URL.

Having an SSL certificate is also an important factor for auditing security. This certificate indicates the use of a secure connection for secure data transfer between the client and the webserver. SSL certificates come in entry-level, business, and advanced trust levels. Acquiring ExtendedSSL is an expensive pleasure for intruders (Vishwanath et al., 2018). But the certificate of entry-level trust can be obtained free of charge, for example, in the certification center Let’s Encrypt. Most legitimate sites have decent SSL certificates. In addition, it is important to pay attention to the position of the URL and domain in the search engines Google, Bing, and Yahoo (Perrault, 2018). The newly created phishing sites do not have time to be indexed by search robots, as a result of which information about them is missing in the results of search queries.

Conclusion

In conclusion, at the public and private levels of audit enterprises, it is necessary to engage in preventive and educational activities actively. Increasing competence in the field of computer technology for individual users, company employees, which will reduce the risk of becoming a victim of cybercrime, will reduce the incidence of information networks. Computer literacy of the population will help to understand better all the threats associated with working in social networks, online banking, and online shopping. Finally, users need to learn to be less careless to take care of their security. Integrative and integrated approaches in the application of preventive measures by law enforcement agencies can increase the level of information security in auditing and make the prevention of computer crimes more effective. The proposed preventive measures will give a tangible result only in the case of joint actions of audit organizations with civil society institutions.

References

Perrault, E. K. (2018). Using an interactive online quiz to recalibrate college students’ attitudes and behavioral intentions about phishing. Journal of Educational Computing Research, 55(8), 1154-1167.

Vishwanath, A., Harrison, B., & Ng, Y. J. (2018). Suspicion, cognition, and automaticity model of phishing susceptibility. Communication Research, 45(8), 1146-1166.

Xiong, A., Proctor, R. W., Yang, W., & Li, N. (2017). Is domain highlighting actually helpful in identifying phishing web pages? Human Factors, 59(4), 640-660.

Xiong, A., Proctor, R. W., Yang, W., & Li, N. (2019). Embedding training within warnings improves skills of identifying phishing webpages. Human Factors, 61(4), 577-595.

An A-133 audit is a requirement under the Office of Management and Budget (OMB) for all Non-Governmental Organizations (NGOs) that receive more than US$ 500,000 per year. Non-profit-making agencies eligible for United States of America government (USG) funds have specific responsibilities stipulated under OMB A-133. As revealed in this paper, understanding auditees’ reporting responsibilities, especially when an auditor identifies a finding, paves the way for a successful assessment. These obligations may be classified by two broad categories that span the year of an audit and the post-audit period.

Auditees’ Responsibilities When a Finding is Identified

According to Ashenfarb (2018), the most important obligation required of an auditee before an OMB A-133 review is the preparation of the Schedule of Expenditures of Federal Awards (SEFA). In line with the American administration regulation under the OMB circular A-133, non-profit-based companies are responsible for designing the SEFA framework. From the OMB viewpoint, since auditees are best placed to identify federal awards and any appropriate terms, they are obliged to share information on all USG grants under their care upon request by an auditor to substantiate the existence of a finding (Garven, Beck, & Parsons, 2018).

In addition to publishing crucial compliance requirements applicable to each of the awards, auditees are required to respond to the finding by accounting for all funds expended during the awarding process (Ashenfarb, 2018). They also identify any pass-through companies.

Auditees’ Reporting Responsibilities During the Year of Audit

Moreover, the auditee has a responsibility to prepare fiscal reports and footnotes, which accurately reflect the respective organization’s financial position, statement of activities, changes in net assets and cash flows for the year under review (Tysiac, 2016).

The auditee has a duty to justify the establishment of internal controls over federal awards and provide reasonable assurance that funds are managed in agreement with laws, regulations, and the provisions of contracts or grant pacts signed between USG and company being assessed (Ashenfarb, 2018). These checks seek to confirm that the auditee has complied with all policies that govern each program or contract. According to Tysiac (2016), it is the duty of the auditee to make adequate preparations before the inspection by informing concerned staff, appointing the lead team to meet the audit team, availing the required resources, and providing access to the premises.

Auditees’ Reporting Responsibilities in Subsequent Years

During the post-audit period, the auditee is responsible for writing management responses on any findings and recommendations made by the auditor. These replies should include suggested corrective actions and their respective execution timelines. The auditee will follow-up to ensure audit recommendations are implemented by taking corrective actions on all audit findings (Ashenfarb, 2018).

The auditee is obliged to prepare a summary schedule of prior audit queries and the measures put in place to ensure compliance in subsequent years. Further the auditee will provide a written acknowledgement of responsibility for the content of the Schedule of Expenditures of Federal Awards in accordance with OMB A-133 requirements, including expenses reported by its sub-awardees (Garven et al., 2018). They are also expected to electronically certify and submit the reporting package within a specified timeframe after the receipt of the auditor’s dossier.

Conclusion

An auditee has a crucial role to play during the year of audit findings and the subsequent period. As revealed above, in addition to presenting any requested documents, the auditee should cooperate with auditors for an efficient assessment. For any audit issue not resolved from prior audit, the auditee should provide a reasonable explanation indicating any plan of action to mitigate current risks.

References

Ashenfarb, D. C. (2018). Identifying deficiencies in single audits: Preparing for the audit quality study. The CPA Journal, 88(4), 34-38.

Garven, S. A., Beck, A. W., & Parsons, L. M. (2018). Are audit-related factors associated with financial reporting quality in nonprofit organizations? Auditing: A Journal of Practice & Theory, 37, 49-68. Web.

Tysiac, K. (2016). 11 tips for success with single audits: Extra care is essential as new guidelines take effect. Journal of Accountancy, 222(5), 40-45.

Entry and Expansion Strategy

Product strategy is both a component and a determinant of the marketing mix. For it has a great influence on the other elements of the mix: advertising, personal selling, channels of distribution, physical distribution, and pricing. No marketing decision is properly made without an appraisal of product policy. Since products are basically means of solving problems for buyers and sellers, physical environment, biological, technological, and cultural forces change them.

The very perceptions and interpretations of environmental developments by consumers create product opportunities. The product line, ready-made American biscuits will need to consider the life-style factors influencing product development. Urbanization, leisure, competition, discretionary income, travel, styles, tastes, automobiles, informality, and convenience have led to the emphasis on product form, readiness, packaging, combination, and selection convenience.

Market Entry

Retailing standards and practices are deeply entrenched in national culture, an arena in which the Vietnam conscientiously avoids interference. For example, national planning restrictions prevent hypermarkets from reaching their full market potential by limiting square footage or disallowing permits. Hours of operation are also controlled by either national or regional legislation in all member countries. Joint venturing with native Vietnam firms also permits retailers to take advantage of indispensable expertise and established distribution networks (Crawford 2003). The structure of the foreign representatives varies by country.

In Vietnam, the company can maintain a marketing sub­sidiary and its agents will successfully maintain their position of market leadership. This employs eight full-time staff, handling marketing and a small distribution facility which includ­ed a warehouse. In the main, however, the company makes use of the indepen­dent distribution system, which comprised about a hundred medical dealerships, serviced by about twenty commission agents. The first stage is to find a partner and open new offices in Vietnam. This stage will take from 3-4 months (Bellis 2001).

The success of any company is closely connected with its management team, structure of the company and people work with it. The structure of the foreign subsidy will be: a general manager on the top who coordinates the work of the division and reported to the main office. Two groups (customer service and fright forwarders) report only to him. The senior management team is responsible for advertising and promotional activities, customers’ support and delivery.

Each foreign representative office has a after sale service department as an obligatory requirement of the policy (Coyle, 2003). Generally, database information is used to help identify, classify, and profile individual customers. This enables the marketer to develop more effective product offerings, pricing strategies, and communication programs and improves its skill at product timing and delivery. With the database information, the marketer can develop forms of two-way communication with each individual customer. Thus, a buyer-seller relationship is created (McDonald and Christopher 2030).

At the second stage (from 6 months to 1 year), market penetration, product planning requires considerable lead time for change, for the addition or deletion of products. It is not uncommon to spend two to four years in developing new products, and this requires advanced market intelligence. The aims are

1. to counteract competitive activity and assure that loss will not occur because someone else introduces the product first;
2. to realize potential profitability;
3. to guard against shifts in consumer tastes;
4. to gain complementary relationships;
5. to gain an additional share of market;
6. to complete a product line; and
7. to use common raw materials as well as production and marketing facilities.

Before launching a product, the company should establish various criteria concerning the size of the available market, the rate of return on investment, the net profit, the patentability of the item, the congruency with current corporate situations, and the impact on the sales organization (Keegan and Green 2007). The term demand, therefore, is multidimensional. Market opportunity is a more specific and narrowly defined term and reflects a more dynamic picture of the demand relationship from the standpoint of the marketing organization itself (Labarbera et al 1998). It refers to the demand for a particular good and service that a firm can provide. Executive vision is a significant variable in assessing opportunity.

The American buskins will position itself as a premium brand proposing unique taste and quality. The limit pricing strategy will help American biscuits to gain market share and obtain competitive position (Tayeb 2000). It is important it is for business directors and managers to understand properly the financial characteristics of the business. This requires the identification of Volume — Cost — Profit — and Cash relationships. The behavior of this Volume — Price linkage is dependent on the level of the Contribution Margin for the particular business (Keegan and Green 2007).

The business planning and budget setting processes used in many businesses tend to produce incremental changes in performance, often particularly achieved by small adjustments to the level of costs incurred — improving financial efficiency (Eden and Ackermann 1998). This Cost Profiling analytical technique seeks to identify potential opportunities for more radical changes to the business cost base. It focuses on improving financial effectiveness by examining the relationship between costs incurred and benefits to the business. The on—going activities’ of the organization are identified; for example customer enquiry handling, preparation of weekly management reports, production engineering etc.

These activities may involve many departments/business units across the organization, thereby incurring cost in each location. Using the budgets/management accounts data for each cost centre’ (i.e. an organization unit where costs are incurred) an analysis is prepared to identify the costs associated with each activity. Through this process the entire costs of the business are analyzed by activity. The focus here is to identify the value to the business’ of the activity. The first step is to identify a set of criteria against which benefit can be judged (Black, 1999).

A company’s market share, current and future, may fluctuate readily. Competitors’ marketing mixes are designed to switch customers to their own brands. Thus, executives are concerned with brand switching–they wish to increase the switch-in rate and decrease the switch-out rate. There are two groups of competitors: national producers and global brands like Nestle. The strength of local producers is unique cultural traditions and products while the strengths of international marketers is their global brand name and customers’ loyalty (Boone and Kurtz 1992).

As an integral part of business, marketing management is concerned with setting goals, establishing policies and programs, and implementing business action for the entire firm. Its major tasks are to translate consumer wants and needs, actual and potential, into profitable products and services that the company is capable of producing; to cultivate markets to support these products; and to program the distribution activities necessary to reach the markets.

Marketing is, therefore, not merely a limited specialized activity of the business, but rather a perspective for the total management team. It does not function as a separate entity in the business, nor is it more important than any other primary activity, such as manufacturing or finance, yet through actual and potential sales it does establish constraints within which the other activities must be performed. This cost of quality approach is in accord with the foundation stone of the supply side of standard economics, the principle of opportunity cost. Improved product quality requires investment outlay, and improvements beyond some point imply higher costs of production with consequently higher prices (Bartlett 1994).

Distribution and Advertising

Distribution

American biscuits are confronted with making a choice from among a variety of distribution alternatives. Although generalized solutions to all distribution channel decisions cannot be formulated, general guidelines can. The economic functions of channel members can be analyzed, significant factors and forces shaping distribution systems can be assessed, and the variety of channel arrangements currently employed to overcome distribution barriers can be classified. In this chapter we shall be concerned with the design of effective distribution systems — with the decision problems confronting managers regarding the choice of the proper balance of middlemen necessary to satisfy customer wants and achieve corporate goals (Bartlett 1994).

In order to reach potential consumers, American biscuits’ distribution decisions will be designed to combine, supplement, or modify those of other firms, in order to form channels of distribution that achieve the most effective distribution. Since markets are dynamic, the opportunity for new combinations is continuously available. Channels are thus used to overcome barriers.

These barriers include the separations of time and space between producers and markets, the costs of moving goods, the communications barriers between producers and users of products, and the separation of demand. In surmounting such barriers, middlemen serve two groups — manufacturers and customers (Brownlie 1995(. Their economic justification stems from performance of their functions more effectively than others. And yet, the margins of middlemen are periodically under attack and investigation, especially in the food industry, where farmers resent the disparity between their margins and those of middlemen (Griffith et al 2000).

American biscuits will sell its products through independent directly to restaurants and cafés, bars and fast food restaurants, and through the retail chain. But middleman functions are not superfluous and cannot be eliminated — although the number of times some of them are performed may be reduced. They can, however, be shifted to customers or manufacturers. But by so doing, costs may actually be increased. The task is to perform them efficiently with minimum duplication (Lance and Woll 2006).

Dealers evaluate product lines on the basis of congruency with current and competitive lines, sales policies, resources, facilities, service to customers, reputation, and profitability. However, effective dealer performance demands not only an acceptance of the product, but also a willingness to handle and promote it as a manufacturer’s programs require. The design of a distribution channel necessitates consideration of the following:

1. information on the significant factors such as past, present, and projected markets, products, and customers;
2. the constraints facing the company;
3. information about competitors’ channels;
4. problems in current business practice;
5. feasible alternatives for meeting problems and constraints; and
6. the nature of ideal and practical models and the likely consequences of each (Lance and Woll 2006).

Channel selection rests basically on cost-revenue considerations. The choice of a channel will be based on profitability, in both the short and the long run. Yet in channel analysis, undue attention is often given to comparisons of sales volume without heed to corresponding costs. Two other potential weaknesses with the use of multiple channels need to be considered by the manufacturer. First, some channels may be better matches with the image of the product line and manufacturer than others, whereas other channels can hamper the image of the manufacturer in the marketplace. For example, a manufacturer of top-of-the-line stereo equipment may hurt its brand identity by using discount stores in one of its channels (Coyle, 2003).

Advertising and Promotion

Advertising and promotion will pay a special attention to cultural norms and traditions of Vietnamese. It must be recognized that advertising constitutes only one of several methods of promotion. The choice of which of the competing methods to use depends on the cost and effectiveness of these competing modes. A widely used and frequently bought product is usually more suitable for promotion by means of advertising than one infrequently bought by a few.

This is apart from other considerations that may dictate the choice among alternatives (Lance and Woll 2006). A contact by a salesman has a higher marginal cost and probable return than one by a television advertising message. A profit maximizing firm takes this into account in deciding whether to use salesmen or television advertising to promote its products. It is, therefore, easier to understand the differences in the advertising intensities among products in terms of a general theory of promotion or communication than by means of a special theory designed to explain advertising alone.

The main advertising channels will be national press and radio, TV and the Internet. Also, American biscuits should place its ads in transport and local shops (posters, ets.). ‘Off-the-page’ purchasing will rely on impulse, and there is a need to present an attractive proposition. The advertisement must be informative enough to enable potential customers to make a decision to purchase. The use of demographic descriptors can be helpful in identifying commonalities (Lance and Woll 2006).

For consumer markets, these will include age, sex, education, stage in the family, life-cycle, and socio-economic group. Personal selling is generally portrayed as being most effective in the transactional stage — in making the sale. Promotion may be used as complementary or supplementary market-communications activities. Their respective roles depend on company products, customers, and markets.

Often they are used in a complementary manner, with advertising paving the way for personal-selling activities. In other situations, such as in making industrial sales, personal selling is usually the most important component, while advertising may be a supplementary activity that helps create awareness. In either case, both should be coordinated by marketing managers. Salesmen should be aware of advertising plans and programs, and advertising campaigns should be developed within the boundaries of sales tasks, both of which should be viewed as mutually supporting functions. The main promotion strategies will be price reductions and press conferences, sponsorship of events and talk shows. In addition, in urban areas, American biscuits can use the following methods: direct response advertisements; direct mail and mail drops; personal (direct) selling (McDonald, Christopher, 2003).

In the last few years, viewers’ emotional responses to advertisements have joined “cognitive responses” as important predictors of post-exposure attitudes. This naturally leads to the consideration of how best to assess emotional responses. The current approach is to record subjects’ ratings of a relatively long list of emotional adjective scales. Because such a list is alleged to be comprehensive, it is applied to all ads without modification (Lance and Woll 2006).

Critics propose the use of a briefer list of feelings that have been selected to apply to an individual ad. The rationale for a tailored set of emotional responses or feelings is straightforward. We assume that advertisements produce a positive attitude toward the brand by evoking an intended sequence of emotion (and cognitive) responses in viewers. Ad-specific feelings are designed to measure the particular emotional responses intended by the advertiser. As such, these responses should be good predictors of the resulting overall attitudes (Johnson and Scholes 2003).

Conclusion and Recommendations

In order to deliver value to the customer, American biscuits create a unique way of conceptualizing the managerial role is required. Cross-cultural differences and unique market will have a great impact on strategies and challenges faced by American biscuits in Vietnam. The company should focus on a customer and create customer value -not company value. Quality products and quality processes are said to be key factors differentiating market leaders from market followers.

It is therefore interesting that the discipline of economics has had almost nothing to say on the subject of quality. Specifically, decision makers in business and government may have failed to give importance to the topic of quality partly because they had been unwittingly trained to view the world through the lenses of deficient theoretical models. The ability to produce quality products, in the narrow sense of meeting standards, is held to be implicit in the nature of technology.

The technology is seen as imbedded in forms of capital, human and machine. In that view, better quality requires the technological forms that produce it, and the technology, in turn, requires investment. In other words, quality costs. Technology itself is almost always taken as an exogenous factor in economic analysis. Among the factors that govern the advertising and sales programs that should be selected are the degree of newness of the product, the existing degree of competition, the ease of entry of competitors who offer similar products, the brand loyalty of customers, the company image, and the corporate niche in the marketplace.

Also, management must decide whether it wishes to skim the market or penetrate it deeply. In such cases, the major challenge is to ensure that each of the channels makes sense on economic grounds. A major problem could arise if certain of the retailer’s suppliers become upset by the mechanisms or means through which the retailer is selling their products.

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Steps in Planning the Audit

Audit plans are usually developed to review a company’s financial statements and assess their credibility and reliability as accurate depictions of a company’s financial position. As a senior partner for Deloitte, in this report, I outline the critical steps inherent in planning an audit of Aramark Inc., which is a multinational company that specializes in the provision of food, facilities, and uniform services to different clients who operate in (but not limited to) the education, health care, and leisure sectors around the world. The steps outlined in this paper are based on general audit planning procedures undertaken by companies in the US and Europe.

According to Kerr (2013), the audit process should comprise of three main phases that include planning, fieldwork, and reporting. For purposes of this report, we only focus on the planning phase, which includes five main steps – understanding the organization’s internal control processes, assessing the risk of material misstatements, planning the materiality level, developing a response to assessed risk, and overall audit strategy, structuring the administrative framework for implementing the audit strategy and assessing the need for experts. These steps also outline the critical and inherent steps we will use in planning and designing an effective audit program for Aramark. These steps appear below.

Understand the Organization’s Internal Control Processes

Aramark, being a global organization, has several internal control processes that could affect the company’s potential for reporting financial misstatements. Modar (2013) supports this view because he says that an organization’s internal control processes could increase the risk of financial misstatements, if not properly supervised, or decrease the risk of the same if management allocates enough resources to the process. Evaluating the company’s internal processes should be a critical step in developing the audit program for Aramark because it would assist Deloitte (later on in the audit process) to design effective auditing procedures. In understanding the organization’s internal control processes, we would look at different aspects of the company’s internal control processes, including understanding its general nature and characteristics, investigating existing controls that are relevant to the audit strategy, assessing the nature and extent of the relevant controls, and reviewing the components that are relevant to the organization’s internal controls. Broadly, these steps would help us to understand the organization’s control processes.

Assess the Risk of Material Misstatements

Assessing the risk of material misstatements is also a key step in developing the audit program for Aramark because it would help us to review the risk of material misstatements at different financial and assertion levels. When assessing these risks, it would be pertinent for the auditors to understand the impact of inherent and control risks in the assessment process. By doing so, it would be easy to determine the acceptable level of detection risk. The same process would also dictate the kind of audit procedures to follow, which would ultimately add to the process of formulating the general audit strategy. The risk of material misstatement may be assessed based on different criteria, including assessing the possibility of misstatements due to fraud, or the failure to comply with specific laws and regulations (Kerr, 2013). Comprehensively, this step would help us to assess the risk of material misstatements.

Plan the Materiality Level

Planning for materiality will also be an important step in the audit planning process because it will provide an indicator of how financial misstatements could affect how users make decisions regarding the company’s financial direction. The process will be a product of what is already known about the audit planning process, plus an assessment of risks that are associated with the process. This step of the audit process would also include the process of formulating procedures on how to calculate materiality (here, materiality includes both planning and performance materiality). This step is critical in helping us to understand the significance of the risks we will evaluate.

Develop a Response to assess Risk and Overall Audit Strategy

This stage of the audit planning process involves the development of an appropriate response to review assessed risks. The response could be to counter challenges in the development of the overall audit strategy or the detailed audit plan. The process should typically involve documenting decisions about the timing and scope of the audit tests (Modar, 2013). It should also involve a compilation of important details surrounding Aramark’s business processes, corporate strategies, and organizational objectives. In the process, we will document how the company is managing its risks and how such processes would affect the overall audit strategy.

This way, we will be able to understand the linkage between the client’s risk management process and our overall audit plans. This process will also lead to the development of an informed audit plan, which will help us to comprehend the resources needed in executing it. The audit strategy would contribute to the development of the audit plan. In other words, the results of the risk assessment process would help us to gain a better understanding of the financial practices of Aramark. Some additional steps we may consider in this process include assessing the business risk to establish materiality, assessing the need for experts, evaluating the possibility of non-compliance with existing laws and regulations, identifying related parties, conducting preliminary accounting processes, and considering additional value-added services (Modar, 2013).

Plan the Administrative Structure

The process of planning the administrative structure refers to the need to form a qualified audit team to implement the audit plan. This team should have adequate knowledge, skills, and experience of doing so. The team may also involve experts who may be versed in different specialized fields of auditing. The specialized areas may include information technology or actuarial science sectors. However, such professionals need to be booked in advance; otherwise, they may be unavailable when undertaking the actual audit process for Aramark. Since the activities of the company are spread in different countries, travel and accommodation plans may also need to be made in advance to facilitate the movement of the auditing team across different audit centers.

Assess the Need for Experts

The last step of our audit planning process involves an assessment of the need for experts because some of the accounting processes of Aramark are detailed and expansive. According to the auditing standards (ISA 620), an auditing expert is a person whose skill sets are not necessarily tuned to fit the accounting field, but whose contributions would help an auditor to make an informed judgment about the auditing process (Gbalam & Ebimobowei, 2013). Depending on the kind of job that the expert may be required to do, he/she may be recruited from within the Deloitte firm or outside it. The expert may be required to help us with several tasks associated with the audit process, including (but not limited to) interpreting international laws and regulations governing the financial activities of Aramark, computing fair values, valuing financial instruments, and such processes. Comprehensively, these processes outline the inherent steps in our audit plan.

Performance Ratios and Analytical Procedures

The analytical tools used in planning the audit will serve as instruments for directing the procedures characterizing the auditing process. They will be important in the audit process because they would help us to understand the timing and scope of the audit process. The purpose of including these analytical procedures in the audit plan is to increase our understanding of Aramark’s processes. It is also supposed to help us identify unknown audit risks that may occur because of unspecified, or unbalanced, relationships in the overall data (Gbalam & Ebimobowei, 2013). There are at least four types of analytical tools in auditing processes. They include regression analysis, computation of ratios using financial and non-financial data, computation of significant ratios, and account balance comparison (Kerr, 2013).

For purposes of this auditing process, we will use three analytical processes – account balance comparison, computation of significant ratios, and computation of ratios using financial and non-financial data. The focus on these analytical methods affirms the views of Modar (2013) who says that most auditing processes are based on simple quantitative techniques, such as ratio and trend analyses. However, our decision to use multiple selections of analytical methods stems from the difficulty in relying on one substantive test as the main basis for the audit process because one test alone does not provide the precision required for such an exercise. We will use the current ratio and debt-to-equity ratios as the main performance ratios for this assignment. The balance sheet and income statements are two accounts that we would use to test the ratios.

Analysis of Balance Sheet and Income Statement

Based on the information provided in Aramark’s income statement and balance sheet, we find that the company suffers a low probability of going concern risk. An analysis of its asset management ratios also shows that the company is doing a good job managing its assets. A close look at its inventories shows that the company has been correctly using its inventories because the value has steadily increased from 508.42 million in 2012 to 587.16 million in 2016. There have been no sharp increases or decreases in this value in the past five years. This fact is supported by the maintenance of its asset and a slight reduction in its liabilities over the past five years.

An analysis of the company’s current ratio shows that it has steadily maintained this index within the 0.96 -1.14 range throughout the past five years. For example, the current ratios for 2012, 2013, 2014, 2015, and 2016 were 1.01, 0.96, 1.04, 1.09, and 1.14 respectively. These ratios show a slight variation in the currency ratio numbers throughout the five years under review. They mean that the company may find it difficult to service its debts because currency ratios of between 1.0-1.5 are low and may suggest that the business is not in a good position to pay its debts (Demir & Bahadir, 2014). Nonetheless, as highlighted in the balance sheet, the company’s liabilities are slowly decreasing, thereby strengthening the company’s financial position. This may mean positive financial outcomes in the future. However, in the short term, it may be prudent for the business to extend its debt-paying period, or seek external sources of finance to pay its creditors. However, it is important to note that there is no ideal current ratio for multinational companies because different organizations work with different current ratios. A current ratio of 1.14 is the highest that Aramark has posted in the past five years and may mean that its ability to pay debts may not be of great concern for now.

An analysis of the company’s debt-to-equity ratios shows the company’s financial leverage, relative to calculations that emerge from dividing the company’s liabilities and shareholder’s equity. It is essential to analyze this index because it shows the company’s reliance on debt to finance its operations. This calculation is relative to the value of shareholder’s equity. A review of the company’s debt-to-equity ratios over the past five years shows a significant decline in this index because, in 2012, 2013, 2014, 2015, and 2016, the company reported a debt-equity ratio of 6.4, 6.37, 3.12, 2.77, 2.42, and 2.4 respectively. An overview of these figures shows that the company posted the lowest debt-to-equity ratio is 2016, meaning that it took the least debt to finance its activities in the same year. This is an indicator of declining aggressiveness in its leveraging practices, symbolizing a reduction in operating risk. Thus, this ratio shows that the company is in a better financial position compared to past years, considering it has reported increased sales numbers and a declining debt appetite in recent months.

Our chosen method for evidence collection is analytical review because we analyzed significant ratios and trends to detect inconsistencies or fluctuations that could imply the presence of financial misstatements or mean the presence of erroneous transactions in the company’s financial books. This data collection technique was instrumental in the audit process because it helped us to compare the financial information with prior periods. This data collection method was also sufficient for our review because it was easy to get all the details regarding the company’s financial operations throughout most of its multiple business sectors on paper (for analysis), as opposed to inspection, observation, or other data collection techniques which would have not correctly captured the scope of the company’s operations.

Discussion of the Audit Risk Model

The audit risk model specifies the types of risks associated with the audit process. It also outlines the appropriate methods to mitigate them. Typically, the audit risk is a product of control risk, detection risk, and inherent risk (Gbalam & Ebimobowei, 2013). The control risk is a product of the failure of the organization’s internal control processes to detect incorrect financial data. The detection risk arises when the auditor fails to identify financial misstatements, while the inherent risks are likely to occur because of omission errors caused by the complexity of the auditing task, or a low skill level of the staff. After applying these audit procedures to Aramark, we find that it has a high inherent risk because it operates in a highly regulated sector, such as the food industry, which is characterized by strict laws guaranteeing the safety of such products. The company also operates in a complex network of related entities, which could cause-related, but different, financial misstatements without strict internal audit controls (Gbalam & Ebimobowei, 2013). Since this is the first audit report of the firm, the failure to comprehend the scope and nature of its operations may increase the nature of the audit risk. This weakness amplifies the inherent risk associated with preparing this report.

The control risk also appears to be high because the company does not have a strong audit committee to oversee its financial operations. Additionally, Aramark lacks a strong audit department that is independent of the manager’s influences, which could detect all acts of financial misdeeds in its reports. Collectively, these facts mean that the company’s audit risk may be high. Assuming that the values of the control and inherent risks are both 60%, we would have to compute the detection risk according to the formula below.

Audit risk = inherent risk * control risk * detection risk

Based on this formula, we find that the detection risk is 27.8%. We derive this figure as shown below.

0.10 = 60% x 60 x detection risk

0.10/0.36 = Detection risk = 0.278 = 27.8%

The audit sampling procedures used here refer to the use of specific audit procedures to less than 100% of the items reviewed in the given audit sample. The goal was to understand the contents of the company’s financial transactions. Two types of sampling techniques often appear in audit risk models. They include the probability sampling technique and non-probability sampling techniques (Gbalam & Ebimobowei, 2013). Both techniques require auditors to use their professional judgment in planning and executing the audit strategy. In our review, we used the non-sampling technique. Non-sampling risks often arise from misjudging the inherent risks. They may also occur if an auditor misjudges the control risk, or makes mistakes when implementing the audit plan. As such, it cannot be measured. In this type of sampling technique, we used the judgment sampling technique, as opposed to the haphazard sampling technique to carry out the audit strategy. In this type of technique, we mostly relied on our professional judgments during the sampling phase. In this process, we used different facts and judgments throughout the sampling process. Backing up this technique was a reliance on our experience in the industry to carry out an effective sampling plan. Indeed, our plan for managing this type of risk was based on adequate planning and supervision of the audit process so that there was minimal probability such types of risk would occur. By doing so, we believe that our preliminary judgment on materiality will be affected by negligible non-sampling risk.

Primary Responsibility of Audit Firm

Our report on Aramark is unqualified because we find that the company’s financial statements comply with internationally accepted accounting standards. Furthermore, we find that the company’s financial records are free from misstatements. In this regard, we assume responsibility for providing a reasonable assurance that the company’s financial information is free from financial misstatements. We also assume that the financial data documented by Aramark is prepared according to international accounting frameworks. Based on this report, we must assume responsibility for the audit report to Aramark’s shareholders. However, this responsibility is only limited to the duties that were expressly agreed on in the initial audit process.

References

Demir, V., & Bahadir, O. (2014). An investigation of compliance with international financial reporting standards by listed companies in Turkey. Accounting and Management Information Systems, 13(1), 4–34.

Gbalam, E., & Ebimobowei, A. (2013). Audit risk assessment and detection of misstatements in annual reports: Empirical evidence from Nigeria. Research Journal of Finance and Accounting, 4(1), 97-109.

Kerr, D. (2013). Fraud-risk factors and audit planning: The effects of auditor rank. Journal of Forensic & Investigative Accounting, 5(2), 48-76.

Modar, A. (2013). Fraud risk factors and audit programme modifications: Evidence from Jordan. Australasian Accounting, Business and Finance Journal, 7(1), 59-77.

Executive Summary

In order to grow and obtain a strong market position, many companies enter foreign markets and sell their products to international consumers. Vietnam represents an individual geographic market that offers great opportunities. It has good geographical location and trade relations with other countries in this region. as a developing country, Vietnam relies chiefly on an efficient technology innovation system, and creates a unique culture of its brand and products which will attract wide target audience. a product line, American biscuits, have opportunities to enter this market as a follower, and create a core of loyal supporters in Vietnam.

In spite of political and economic risks, sales in Vietnam provide additional profits and are all that enable some companies to make any profits at all. International expansion is one of the best methods to sustain strong market position and increase sales.

Chapter 1 Country Profile: Vietnam

Physical and Political Environment

Vietnam is part of Indo-China. Vietnam is considered a potential market for packaged food products proposing great opportunities for growth. In July 2000, U.S. President Bill Clinton signed a trade pact with Vietnam that promised a new era in two-way trade between the former adversaries. Since 60 percent of Vietnam’s population is under the age of 25, it is no surprise that PepsiCo and the Coca-Cola Company were also quick to make moves in Vietnam.

Experts agree that the Vietnamese market holds tremendous potential over the long term. It may be two decades before Vietnam reaches the level of economic development found in Thailand today. Meanwhile, the country’s location in the heart of Asia and the presence of an ample, low-wage workforce are powerful magnets for foreign companies. Overall FDI peaked at about $3.1 billion in 1997 after rising steadily since the early 1990s. Investment pledges totaled $1.48 billion in 1999, down dramatically from $4 billion in 2004. U.S. investment in Vietnam has lagged well behind that of other countries (VIETNAM: Economic Policy Analysis, 2006)

The population is very poor, with 2005 annual per capita income of only about $350. However, urbanites with savings estimated at $1 to $2 billion com­prise one-quarter of the population. The infrastructure is undeveloped: Only 10 percent of roads are paved, elec­tricity sources are unreliable, there is less than one tele­phone per 100 people, and the banking system is unde­veloped. The Communist Party of Vietnam (CPV) is struggling to adapt to the principles of a market econ­omy, and the layers of bureaucracy, built up over decades of communist rule slow the pace of change. Part of the problem was the “currency contagion” that had gripped Asia since mid-1997.

Asian countries that had been major investors were scaling back their activi­ties in Vietnam. In January 2000, for example, the regula­tory environment improved with the enactment of an enterprise law that streamlined the process of setting up a business; a stock market was also opened (VIETNAM: Economic Policy Analysis, 2006).

Socio-Cultural Issues

Operating in Vietnam involves the company addressing the issue of cultural difference and conse­quently developing a balance between standardization and adaptation. In Vietnam HRM is the prerogative of senior management. HRM has elevated human resource issues to a position of key strategic importance. Vietnam is a food-sensitive country with deep historical traditions and values. Metaphorically, “If cooking were painting, Vietnam would have one of the world’s most colorful palettes” (Vietnamese Food, n.d.). The main opportunity for the company is that the Vietnamese like to try something new.

In societies like Vietnam the power distance is large and formed the basis of social relations. It is important to note that collectivistic society shows concern for a much wider group and emphasizes belongingness which can extend to organizations (Daniels et al 2006).

Language differences represent an important area of concern for a foreign company. In global marketing, of course, language is a crucial tool for communicating with customers, channel intermediaries, and others. One impact of globalization on culture is the diffusion of the English language around the globe. Today there are more people who speak English as a foreign language than there are people whose native language is English (Hanson et al 2005).

Packaging is probably the cheapest, quickest, and easiest way to adapt a product to make it more suitable for foreign markets. Language may not be a problem, because in Vietnam it is common to find products from English-speaking countries packaged using English. However, it is better to use the country’s language if the company wants to tap the full potential of the market. A special attention should be paid to colors and national symbols. Multilanguage packaging is becoming more and more prevalent for consumer goods (Tayeb 2000).

PESTEL

Today, political situation in Vietnam is stable marked by democratic processes and liberalization reforms. Strong political traditions have a great impact on Vietnam. After WWII, the country has been bisected roughly according to the pattern of the 1945 occupation zones, an arrangement that clearly reflects the realities of external power rather than of local national aspirations. Political interference and corruption are the main risks for a foreign company.

Legal Environment: Vietnam introduces laws and regulations in order to support foreign subsidies and attract FDI (foreign direct investments). In order to support national economy, the government prevents price rises, or even to rolls them back in basic industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Government has the influence to block or roll back price increases (Hanson et al 2005).

Economic situation in the country is marked by high inflation rates and low income per capita. Thus, liberalization and high level of investments can be considered as opportunities for a company to enter this country. Southern Vietnam has higher standard of living than the north part. For a foreign company, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks o inflation, currency devaluation, and expropriation (Hanson et al 2005). All these create many additional uncertainties for those encountered in national marketing.

Social-demographic factors suggest fast population growth and decreased mortality rates. Both in physical appearance and in most aspects of their culture-notably, their language, their traditional form of administration, and their religion, which contains elements of animism, Taoism, Confucianism, and Mahayana Buddhism–the Vietnamese show much the closest affinities of any Southeast Asian people. It is the northern half of Vietnam which has the larger population, and, in spite of provisions for moving refugees to the south, this distinction is not likely to disappear entirely (Johnson and Scholes 2003).

Technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability. Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques have added greatly to the efficacy of planning activities. Such tools as critical paths, input-output analysis, payoff matrices, decision trees, linear programming, and simulations, discussed in later chapters, are used extensively in marketing-planning operations (Johnson and Scholes 2003).

Chapter 2 National Audit

Product Line

The product line to be marketed in Vietnam is ready-made American biscuits. There is no need to adapt this product line to new market, for this reason it will be kept standard. In recent years, international food preferences are gaming increased acceptance In Vietnam., for instance, McDonald’s and Coca-Cola Inc. Heads of families in Vietnam are pressed for time and need home-cooked meals. Also, young people are experimenting with different foods, and the global tourism boom has exposed travelers to American biscuits and other ethnic foods. Shorter lunch hours and tighter budgets are forcing workers to find cheap food. Also, as cultural differences become less relevant, such conve­nience products will be purchased in any country when consumer disposable income is high enough. Also, packaged ready-made American biscuits can be marked for Italian restaurants and fast food bars.

This product line will suit the needs of the market including cheap but high-quality products. This product line will be available for different consumers including low-income and middle-income families, and fast-food restaurants. The choice of Vietnam is not accidental (Keegan & Green 2007). This market is considered as the most potential one for food industry because it has the poorest infrastructure development among other countries in this region.

The main challenge is that American biscuits are well-positioned to take on this important global leadership role. The basic advantage of this product is absence of seasonality in purchases, which allows the company to calculate revenue growth and the degree of market penetration. In summer months, there can be a decline in sales, but it will not have a great influence on revenue and growth patterns (McDonald & Christopher, 2003).

Target Market

The target of American biscuits will be based on income segmentation and benefits segmentation. This approach is based on superior understanding of the problem a product solves, the benefit it offers, or the issue it addresses.The potential target market for American biscuits is low-income families. Most low-income families are not able to snack in the restaurants and prefer to cook themselves. Also, American biscuits can create a separate low-cost offer for fast food restaurants based on their purchasing potential. American biscuits can propose competitive prices to its customers (Keegan & Green 2007).

In relation to minor competitors, American biscuits can provide comparable buyer value but perform the activities more efficiently so as to attain a cost advantage, or perform the activities in a unique way that raises the value to consumers. Low-income families represent 80% of the market and for this reason this customer segment is the most attractive for American biscuits. Also, experts predict that the Vietnamese fast food market will grow in the next five years which creates long-term opportunities for the company (McDonald, Christopher 2003).

American biscuits are based its strategy on a differentiation criterion. This allows American biscuits to shift its focus to brand image and price reduction measures. This strategy will help American biscuits to maintained high-speed growth through continuous optimization of its product mix. Positioning of the brand can be characterized by establishing trustworthiness, confidence, and competence for customers. Degree of differentiation is not large, and American biscuits should represent a market where competitors can differentiate their products and that is why have less rivalry (Keegan & Green 2007).

Rivalry will be reduced where customers have high switching costs – i.e. there is a significant cost associated with the decision to receive products from an alternative competitor. American biscuits propose to its customer’s competitive prices to ensure customer satisfaction (Tayeb, 2000). American biscuits can use parity pricing or going rate strategy. This strategy will help the company to attract buyers and create a core of loyal brand support. Nevertheless, penetrating pricing strategy can also be used at the initial stage of marketing campaign. It allows demonstrating product benefits for potential customers (Johnson & Scholes 2003)

Country of Origin

Also, American biscuits should take into account country of origin and its influence on consumer’s choices. The country of origin affects consumer perceptions of product quality and has a significant influence, beyond advertising and marketing techniques, on the acceptance and success of a product (Johnson & Scholes 2003). The goal of global marketers is to take advantage or benefit from positive, and to neutralize negative, country of origin biases (Gardiner, 2005).

So-called national stereotypes and buyer attitudes toward particular countries of origin can affect the way in which export prices are interpreted in foreign markets. Customer reactions to price and the judgments that customers make will be conditioned by their perceptions and attitudes toward the country of origin of imported goods (Tayeb, 2000). The objectives for American biscuits are: to initiate co-operative marketing with supermarkets and stores in the big cities around the country, to contract with fast-food restaurants around the country, to expand regionally with both media and sales personnel, to constantly achieve cost benefit through an expanding provider network while not compromising patient care. As American biscuits compete in a progressively fiercer marketplace for a larger wallet share of an increasingly discerning and diverse customer base, they become ever more communication-dependent (Johnson & Scholes 2003)

SWOT

The main strengths for American biscuits are strong brand equity and country of origin image, innovative approach to cooking and unique taste appealing to mass consumers. The main weaknesses are lack of flexibility in value proposition and product differentiation (the company will have to focus on price). Also, lack of patient protection and high-cost structure will have an impact on American biscuits.

The opportunities involve positive economic conditions and market growth. American biscuits can gain a strong reputation among customers. An unfulfilled customer need and loosening of regulations will help the company to enter this new market. The follower strategy will help American biscuits to obtain a strong market position and compete with national producers of confectionary. The threats are competition from national and international companies specialized in confectionaries and biscuits. Substitute products like chocolates and other types of biscuits will have a dominant impact on the company and its growth (Stacey, 1996).

Conclusion

In order to enter Vietnam, the company should take into account threats and opportunities and cross-cultural differences between a native and foreign countries.

Achieving strate­gic fit in international marketing, today rarely means stable fit and, increasingly, strategic man­agement means change management. Finally, American biscuits need to recognize that doing business in Vietnam involves cross-cultural communication in all aspects of the relationship. American biscuits have high potential to occupy a niche in this market. Successful promotion and advertising campaigns will help the company to attract wide target audience and increase sales in a year to sustain strong market position and loyalty of customers.

Bibliography

1. Daniels, J., Radebaugh, L., Sullivan, D. 2006, International Business: Environments and Operations. Prentice Hall.
2. Gardiner, P. 2005, Project Management: A Strategic Planning Approach. Palgrave Macmillan.
3. Hanson, D., Dowling, P.J., Hitt, M.A., Ireland, D. and Hoskisson, R.E. 2005, ‘Strategic Management: Competitiveness and Globalisation’, 2nd Ed., Nelson Australia Pty Ltd.
4. 4. Johnson, G., Scholes, K. 2003, Exploring Corporate Strategy. Hemel Hempstead: Prentice Hall.
5. Keegan, W. J., Green, M. 2007, Global Marketing. Imprint Unknown; 5 edition.
6. McDonald, M. 2003, Marketing: A complete Guide. Palgrave Macmillan.
7. Stacey, R. 1996, Strategic management and Organizational Dynamics, 2 ed., London, Pitman.
8. Tayeb M. 2000, International Business: Theories, Policies and Practices, Harlow, Pearson Education.
9. VIETNAM: 2006, Economic Policy Analysis. Web.
10. Vietnamese Food. n.d. Web.

Executive Summary

The Gap (Gap) is a well known name in the retailing world for clothing and related accessories for men, women and kids. Sold under the reputed brand names like Gap, banana republic, old navy and piperlime range of footwear. Primarily operating in North America, the company operates more than 3,100 stores worldwide, having stores in United States, Canada, the United Kingdom, France, Ireland and Japan¹.

Besides this, the company has an online presence as well, which makes it accessible to markets across the geographical boundaries. During the 53 weeks ended in February 2007, company recorded revenues worth $15,943 million, a decrease from the corresponding period in 2006². In fact the company saw similar downtrend in revenues during the FY ended January 2006, when the revenue figures came down by about 1.5% from the 2005 figures. The net profit figures also saw corresponding decline during this period. This is a testimony to the kind of competition the company has been facing during the last couple of years. This calls for some adjustments and reviews of the policies being adopted by the company.

Company’s Purpose and Values

Gap Inc. takes pride in calling itself a brand-builder and creating emotional connections with customers around the world through inspiring product design, unique store experiences and compelling marketing.

• Company’s purpose³ is, “To make it easy for you to express your personal style throughout your life”.
• Values guiding the company’s business operations are; integrity, respect, open-mindedness, quality and balance.

With this purpose and value configuration the company offers a wide variety of products like Apparel, Shoes, Accessories, Intimate apparel and Personal care products with the availability of brands like Gap, GapKids, babyGap, GapBody, Banana Republic, Old Navy and Forth &Towne

Stakeholders

For any organisation to work, a number of stakeholders have to pool their efforts. Terry & Franklin (1994) define management as ‘a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human beings and other resources’. Management therefore involves a coordinated approach taking care of all the factors affecting the business operations. Functioning of an organisation is mainly affected by two types of factors;

• Internal: These are the factors like the strengths of the organisation, in terms of its finances, human resources, management, strategies etc. These factors can be controlled well by the organisation.
• External: These are the factors on which an organisation may not be able to exert much of its control. These include, the legal and political scene prevailing within the state/ country of its operations, number and types of competitors, suppliers in the market, terms and conditions from financial institutions, alternative products available in the market, newer technological innovations etc.

For Gap Inc. the key internal stakeholders are the more than 150,000 employees around the world and its shareholders with the task of management being performed by a dedicated lead by Glenn K. Murphy, the Chairman and Chief Executive Officer. The executive team includes;

• Jack Calhoun – President, Banana Republic.
• John Ermatinger – President, Japan.
• Marka Hansen – President, Gap.
• Toby Lenk – President, Gap Inc. Direct.
• Art Peck – EVP, Strategy & Operations.
• Stan Raggio – SVP, Gap International Sourcing.
• Dawn Robertson – President, Old Navy.
• Eva Sage-Gavin – EVP, Human Resources.
• Lauri M. Shanahan – Chief Legal & Administrative Officer.
• Sabrina Simmons – EVP and Acting Chief Financial Officer.
• Stephen Sunnucks – President, Europe.
• Michael B. Tasooji – EVP and Chief Information Officer.
• Tom Wyatt – President, Gap Inc. Outlet.

Gap-SWOT analysis

• Strengths: Strong brand identity; wide network of stores; more than 40 years of experience in the business.
• Weaknesses: Declining profits in the recent past; Concentration in North America
• Opportunities: Growth in online business; lucrative markets of India and China; Launch of newer brands in the recent past.
• Threats: Increasing competition; availability of a number of other brands; counterfeit products

Strategies for Future

In view of the above analysis, it is quite clear that Gap has the strength to become a leading brand in the market, but it needs to set its house in order, by setting priorities for the immediate as well as for the long term future. Huge market potential in the South Asian region in general and in India and China in particular needs to be tapped by adopting appropriate market penetration strategies.

References

Terry, George R and Franklin, Stephen G. (1994). Principles of Management. Richard D Irwin Inc. USA.

Gap Inc (2008). Web.

Datamonitor (2006). Gap Inc – Company Profile. Datamonitor Americas, NY.

A company’s communication system safety status audit is based on the application of safety measures to ensure information is not lost. Such an audit also puts into consideration the facilities that the company or organization has put in place to uphold security of stored information and data, which are confidential to the company. In order to elucidate how secure information is, the company should put in place strict measures and restrictions that will govern its access and use. Other than administrative measures, there should be physical measures that ensure all computers and network systems are secured from intrusion. Technical safeguards should ensure there are limitations and policies that work specifically to reduce or do away with information loss or theft. This paper outlines the seven possible questions that should be answered to help a company establish a perfect security audit.

Defining the Scope of your audit: Creating Asset Lists

The scope of the audit will help establish all materials and systems employed in the establishment of security measures. In the company that I work for, the scope for the audit will include all items and systems that are used by the company at the administrative level. Some of the systems to be considered for audit will be the company’s computers, laptops, access cards for the employees, websites, routers and networking systems. These are just but a few points of concern, they depend on the intensity of the audit.

Create A ‘Threat List’

The need for a security audit shows that there is a great threat to the information held by the company. The highest threat to information stored is hacking of the company’s passwords. The other threat is intrusion by outsiders; since the company does not have specific employees’ cards. There is also a chance of mechanical tapping of the company’s routers and networking systems. It was also established that employees do not safeguard the company’s computer passwords; hence subjecting information to a threat of being stolen.

Predicting The Future

Due to the carelessness of workers with information, the company is at a risk of losing vital information to hackers. Another indicator of trouble in future is that the company stands a chance of exposing vital and private strategic information to competitors; this may cause it to be kicked out of existence by its rivals. In addition, the company risks physical intrusion since it lacks specific strategies to control flow of people in and out of the company’s premises; it is contributed by lack of technical employees’ cards.

Prioritize Your Assets & Vulnerabilities (Rank)

In the case of assets held by the company, the highest vulnerability is intrusion of the company’s routers and networking systems. This is a serious threat since the company stands to leak important information to its competitors, who are always on the lookout for new the new advancements being implemented. The other assets that are highly susceptible are its computers and memory gadgets, which store the company’s information. Without effective backup systems the company stands to lose all information stored.

Creating Backups

Loss of information to hackers is not as serious as losing it completely. To avoid losing information, the company should consider creating a backup for all information. Backups can be done using compact disks in network servers or by copying information to external storage devices. Information can also be stored by individual employees using advanced technology, in which it is stored in the internet. Although the company does backup its data, it should do so more often.

Email Protection & Filtering

Despite the fact that the company has installed applications used to detect spam, its employees are not educated on how to reduce spam in their emails. Most of the employees in the company do not realize the need to protect their emails and filter their network connections.

Preventing Physical Intrusions

The company has alarm systems and there are night-guards to prevent cases of theft of computers and laptops. However, during the day there are no systems to check intruders into the company. The company does not have electronic sensors and check-in systems to control individuals moving in and out of the company’s premises.

Introduction

Many factors influence the marketing strategies of organisations. Every industry is impacted by internal and external changes in the market. Thus companies have to adjust their strategies in order to stay relevant in their field. This environmental audit examines the marketing strategy of a yogurt company from the UK, using Yazoo as the primary example, and evaluates the impact of various environmental factors on its course of action. The analysis is focused on factors from the internal and external marketing audits and the company’s recent marketing campaigns.

Micro-Environment

According to Statista (2017), the company remains one of the most popular brands of yogurt in the UK. In fact, in 2014, it was the second most popular yogurt in the country (Figure 1). However, the products’ popularity dropped the following year, which reveals a flaw in the company’s marketing campaign. The company’s assessment of its customers’ needs and preferences can be seen in the newest addition to its assortment – drinks without sugar (Yazoo 2017b). This change is based on the current preferences of the market.

The company’s customer analysis yields the following results:

• The target audience is represented by young adults and adolescents.
• The latest advertising campaign ‘#ShakeItUp’ is an example of using current trends to appeal to a particular audience (Yazoo 2017a). The games and interactive graphics on the website appeal to a specific niche.
• The company’s distribution channels also show the direction of business, as the company is active on social media.
• Unmet needs are being fulfilled in the creation of a new dairy product called No Added Sugar (Yazoo 2017a).
• Customer loyalty is declining (Dawes, Meyer-Waarden & Driesener 2015). Thus new campaigns and initiatives are needed to sustain profitability.

The example of Yazoo shows that the company tries to introduce new ideas fairly often, basing its efforts on customer participation. For instance, in 2015, the company started marketing a new dairy product which resembled a smoothie – a drink that was becoming more popular among people concerned with their health (Arthur 2015). The focus on health concerns also became a part of its marketing campaign as the drink was said to contain no artificial sweeteners and flavours.

The analysis of competitors shows that:

• The main competitors are Danone and their product Actimel, and Müller with a milk drink called Frijj (Statista 2017).
• Danone’s target audience differs from Yazoo’s, as the former markets its milk drink to families and health-driven individuals. Frijj, on the other hand, is marketed to young people as well.
• Sarooghi, Libaers, and Burkemper (2015) argue that the industry’s environment strongly impacts the companies’ possibilities for innovation. Actimel and Yazoo pursue different target audiences, which allows them to co-exist in the same environment. However, Frijj is a strong competitor whose influence on the market is substantial.

Macro-Environment

The social environment of the business shows the following trends:

• Customers’ motivations for purchasing specific products has shifted in the last few years. The desire to purchase ‘green’ products, especially food, grows every year. As Khalili and Duecker (2013) state, customers are much more attentive to the details of manufacturing now than they were before.
• The current generation of young consumers is also interested in making conscious choices about their food. For this reason, Yazoo launched the drink mentioned previously, No Added Sugar. This decision is based on health-related trends.
• Wee et al. (2014) state that organic food products and the concept of healthy food are becoming more and more widespread. Thus the addition of new healthy dairy products is clearly an attempt by Yazoo to address the changing environment (Ghadge et al. 2017). The social climate greatly affects the company’s marketing strategy.

The impact of the technological environment is also significant (Schaltegger & Wagner 2017). As was mentioned previously, the company spends a significant amount of its resources on social media. As Yazoo wants to appeal to a younger audience, its marketing decisions are based on the fact that this generation spends a significant part of the day online.

SWOT Analysis

Conclusion

Yazoo is an example of a company that follows a number of current trends while ignoring some of the most popular ones. For instance, people’s rising interest in products that are marketed as healthy should be exploited by the company much more. Yazoo can consider adding new products to its range, focusing on No Added Sugar as a healthy option for young people, and bringing more attention to some environmental issues such as recycling and clean manufacturing. Overall, the factors of customer interest and unmet needs seem to be the most relevant to the yogurt market in the UK.

Reference List

Arthur, R 2015, ‘Move over fruit, it’s time for dairy! Yazoo sees yogurt smoothies soar as snackification strikes’, Beverage Daily. Web.

Dawes, J, Meyer-Waarden, L & Driesener, C 2015, ‘Has brand loyalty declined? A longitudinal analysis of repeat purchase behavior in the UK and the USA’, Journal of Business Research, vol. 68, no. 2, pp. 425-432.

Ghadge, A, Kaklamanou, M, Choudhary, S & Bourlakis, M 2017, ‘Implementing environmental practices within the Greek dairy supply chain: drivers and barriers for SMEs’, Industrial Management & Data Systems, vol. 117, no. 9, pp. 1995-2014.

Sarooghi, H, Libaers, D & Burkemper, A 2015, Examining the relationship between creativity and innovation: a meta-analysis of organizational, cultural, and environmental factors’, Journal of Business Venturing, vol. 30, no. 5, pp. 714-731.

Schaltegger, S & Wagner, M (eds.) 2017, Managing the business case for sustainability: the integration of social, environmental and economic performance, Routledge, New York, NY.

Statista 2017, Brands of yogurt drinks and cold milk drinks ranked by number of users in the United Kingdom (UK) in 2014 and 2015 (in 1,000). Web.

Wee, CS, Ariff, MSBM, Zakuan, N, Tajudin, MNM, Ismail, K & Ishak, N 2014, ‘Consumers perception, purchase intention and actual purchase behavior of organic food products’, Review of Integrative Business and Economics Research, vol. 3, no. 2, p. 378.

Yazoo 2017a, Heritage. Web.

Yazoo 2017b, No Added Sugar milk drinks. Web.

Mercedes Benz United States International (MBUSI) had the vision to build a passenger manufacturing vehicle facility in the United States by the end of 1993. In September 1993, Tuscaloosa County in Alabama was the selected site and a plant of $300 million was installed. The purpose of MBUSI was to manufacture M-Class Sport Utility Vehicle (SUV) for the global market. The installation was accomplished in July 1996, manufacturing of the vehicles commenced in January 1997, and in September 1997, the first vehicle went on sale (MBUSI’s website par 1). The paper gives an insightful analysis of MBUSI through discussion on some sub-topics as follows:

Roles of supplier contracts in helping MBUSI achieve the process objectives: MBUSI has two basic business objectives; one is to amass Mercedes quality vehicles and the other is to gratify its clientele about performance, safety, and above all price according to Ballou, Tabor, and Uzumeri (3). Therefore, the role(s) of supplier contracts have an upper hand to facilitate these two basic objectives. An article in ‘Method 123’ (par. 2) gives the following roles; first, the supplier contract helps to specify what ought to be delivered by a specific supplier and if the deliveries have met the set criteria by MBUSI. For example, Ogihara Corporation supplies body stampings to MBUSI as Dunlop Tire Corporation supplies tires among others (Ballou et. al. 7). Another role played by the supplier contract is to state the responsibilities of each party. For example, Ogihara is obliged to deliver body stampings prescribed to MBUSI on time while MBUSI is meant to pay Ogihara for the services delivered. This role enables MBUSI to produce quality vehicles at the right time. Another role is that of pricing plan and invoicing procedures. For example, if the price of the supplier is high, the cost of the vehicles produced will also be high; hence MBUSI will not have met its process objective.

Ways MBUSI can monitor if suppliers meet contractual obligations

There are several ways in which MBUSI can determine if the suppliers contracted are meeting their contractual responsibility. They include (CIPS 2):

• Product quality – MBUSI should look at the quality of the product if it is at par with their expectations. If the quality is not standard then the supplier has not met his contractual responsibility. For example, if during shipment, the body stampings imported by Ogihara get corroded then the quality would be compromised and Ogihara will be below par in terms of contract specification.
• The level of received rejects – In this case, MBUSI should evaluate the number of rejects brought in by the supplier and according to that number, the management will be able to determine if the supplier is meeting contractual obligation or not.

According to Ballou and colleagues (7), MBUSI has set up a ‘just-in-time and in-sequence mode of working and therefore, if a supplier does not go according to this rule then the supplier company is shunning away from its contractual responsibility.

The above are some of the ways MBUSI should use to ensure that suppliers are working according to the contract so as it achieves its objective.

Risks encountered by MBUSI and suppliers if the contract is not adhered to by the suppliers

Some of the risks include:

• Tempering with the quality of the products supplied. MBUSI can risk receiving products that are tempered if the supplier does not adhere to the contract.
• If the supplier is not going per the set time of delivery, then MBUSI can experience a delay in its production due to the delay caused by the supplier.
• The supplier’s decision to act out of the contract might make MBUSI take a risky resolution and switch to other suppliers which might be ineffective and costly.
• Supplier’s failure to act according to the contract might make MBUSI not deliver to the customers on time hence a loss of sales.
• The suppliers can risk contract termination if they work outside the setup contract.
• Lastly, suppliers can also risk being underpaid if they do not perform under the specification of the contract.

Apart from the risks encountered by both parties, there are some concerns about MBUSI’s relationship with suppliers according to the writer. Ballou and colleagues state that more than two-thirds of the inputs of the vehicles are from suppliers in the United States and some from Germany (7). The distance varies and therefore if effective and efficient communication is not prompted then delays will be caused. Proper advanced planning strategies should be put in place to avoid production inconveniences. The main aim of bringing suppliers closer (by MBUSI) is to facilitate efficiency and fast deliveries, but the suppliers may take that for granted and cause delays.

Risks MBUSI encounters by encouraging suppliers to house tooling that is owned by MBUSI

Tooling according to Ballou and colleagues is the fixed asset employed to generate constituents. MBUSI might own them but they are situated at the supplier’s premise (12). The risk involved in housing them at the supplier’s premises might be damages and production of sub-standard products due to incompetent use. The assets might be used by the supplier to produce for companies other than MBUSI, as there is no direct supervision. It may also cause delays as MBUSI might have not deployed any of its personnel to hasten the process.

The contrast between evidence gained by auditors by performing strategic and process analysis and evidence as a result of detailed tests of transactions.

On one hand, evidence from strategic and process analysis is defined as the investigative procedure used by auditors to examine the reasonability of balances and it includes; ratio and trend analysis and logic and reasonability tests. On the other hand, evidence from detailed tests of the transaction is defined as the audit verification from a detailed supporting evidence and it may include; contracts, invoices among others (Audit Planning ACW 250 34).

Other contrasts may include (Audit Planning ACW 250 35-41):

• Evidence from the strategic analysis is not propped up by original documents, while evidence from tests of the transaction is supported by original evidence, for instance, invoices.
• Strategic and process analysis evidence involves calculations and tests of reasonability by the auditor while the latter only reviews supporting balances.
• Assumptions are incorporated in the strategic analysis and the auditor examines the correlation of all the variables while tests of transactions do not involve assumptions, rather a verification of all the source documents is done
• The strategic analysis does not give accurate results while tests of transactions provide an accurate answer.

Financial analysis

In the year 1997, MBUSI was not profitable as the market for Sports Utility Vehicle was very competitive due to lower prices offered by other companies. The production level was also below par as they produced 65,000 vehicles, a figure below their target of 80,000 vehicles. MBUSI planned to increase its capital investments to $40 million by November 1998 and increase its labor force by 100 employees. This was geared to increase production by 35,000 vehicles (Ballou et. al. 15-16).

Works Cited

Audit planning ACW 250. n.d. 2009. Web.

Ballou, Brian. Tabor, Richard and Uzumeri, Mustafa. Cases in strategic-Systems Auditing: Mercedes-Benz U.S International. United States: University of Illinois. 1999.

CIPS. n.d. Performance Monitoring of suppliers. 2009. Web.

MBUSI website. n.d. MBUSI history. 2009. Web.

Economic analysts and auditors analyze the accuracy and validity of a company’s financial statements using audit testing. The audit test tool collates sufficient materials for performance analysis. However, a negative response from the analysis means a misstatement in the organization’s financial statement (Learning Zone, 2013). Factors that influence financial error include inaccurate analysis, system error, and the auditor’s inefficiency. However, the auditor can eliminate the anomaly by changing the system error and re-validating the audit test. Thus, the SOFP generates additional evidence for the audit test. Audit test can be classified into the inquiry group, inspection, observation, and recalculation group. The inquiry group documents the company’s pay channels and weak links (Learning Zone, 2013). The inspection group tests payment references made by the accountant. Consequently, the observation group documents operational figures and payments. The re-performance or recalculation group collects additional data from the audit test.

The analytical performance of the organization based on data collection is called the substantive test. The features of the substantive test include Analytical procedures, Test of controls, and Test of details (Mills, 2014). As a result, the organization’s value can be computed using receivables, income, and payment figures. The components of the Test of details include observation, tracing, inspection, confirmation, and recalculation. The auditor collects operational reports for payments and liabilities. Consequently, the operational results are analyzed and tested to ensure accuracy. Thus, substantive test combines four analytical techniques to produce a valid financial statement. The analytical techniques include inquiry, inspection, observation and recalculation. The substantive test results show the wellness of the company’s financial statement. The auditor’s recommendations are based on the audit procedures, sample data, variables for analysis, and time.

Definition of terms

• PADO: Tests for Presentation and Disclosure
• BRAO: Test of the Details of Balances
• TRAO: Test of Controls
• GAAS: Generally Accepted Auditing Standard
• PCAOB: Public Company Accounting Oversight Board

GAAS and PCAOB standards

The Securities and Exchange Commission regulates audit reporting for the dealers, auditors, and brokers. The GAAS enables audit quality and evaluation objectives. However, auditing procedures facilitates auditors’ performance under the GAAS. The GAAS comprises six audit sections that regulate a firm’s financial statement. As a result, auditors must comply with the regulations of the GAAS to ensure quality interpretation of the financial statement. The GAAS standards include audit engagement, requirement, interpretation, publication, and appendixes (Learning Zone, 2013). The PCAOB regulates the interpretation of a firm’s financial statements. The categories of the PCAOB include integration of audits, multiple analysis, use of service, and benchmarking controls. Consequently, auditors must interpret the Test of controls using specific guidelines from the GAAS. The integration unit comprises nine audit sections and thirty three subsections.

Substantive audit plan

A substantive audit plan to test the assertion of cash must comply with audit procedures and standards. As a result, the financial statement for receivables and cash payment must be accurate. The substantive plan for the assertion of cash includes existence, occurrence, completeness, rights and obligations, measurement, valuation, and disclosure (Mills, 2014). Auditors must comply with the design to ensure quality interpretation of the firm’s financial statements. Account existence monitors the firm receivables and balance sheet while account occurrence documents the annual financial turnover. The valuation report documents the firm’s sales record and the balance statement. However, the complete financial analysis can be presented in the disclosure reports.

References

Learning Zone: Analytical Procedures: A Powerful Tool for Auditors. (2013). Web.

Mills, K. (2014). The basics of internal auditing. Web.