Integrity & ethical values- Strong
The integrity and ethical values of the firm are really strong. The owners are willing to expand and are not willing to do any wrong, that is one reason they want an audit conducted so that the financial statements provide accurate information. The owners have good ethics and integrity. The way the business has been going on in the past shows that there is integrity and ethics in the firm as a whole.
Commitment to competence- Moderate
The commitment to competence is moderate because it is seen that the firm has no well defined long term plans and nor does it take into consideration the emerging or existing competitors.
Board of Directors/ Audit committee participation - Weak
The participation by Board of Directors or Audit Committee is extremely weak because they meet once a year which is not acceptable. The Board should meet often, also the firm does not have an audit committee and the members of the Board consist of the wives of both the owners. Their wives do not play an active role in the day to day affairs hence it is not a good move to have them on Board.
Management Philosophy and Operating Style - Weak
The philosophy and operating style of management is weak. The daily receipts are not recorded or prepared at the beginning of the day. Any matters are also looked into only when there is a certain problem. The firm does not own an accounting software which is a necessity for maintaining accounts well.
Organizational Structure – Moderate
They organizational structure is moderate because a lot of responsibility and work is on Mr. Day which is not right. The owners should take some responsibility. Also, the work is not clearly defined and assigned, instead it is assigned on the availability of the workers. This shows that there is no clear demarcation of the work.
Assignment of Authority & Responsibility – Weak
The authority and responsibility is only assigned to Mr. Day which shows that the overall assignment of authority and responsibility is weak. No one person should be capable of completing all the tasks. This ensures that there is no possibility of fraud.
Human Resource Policy & Practices - Moderate
Human Resource policy is not strong enough to plan about the requirements of the employees in the long term. The accounts assistant are students who are only retained for two years. Human resource policy should be such that the employee retention rate is high.
Overall Evaluation - Moderate to Strong
The firm as a whole is between moderate to strong, the integrity and ethics helps business grow. It only needs to change the Board of directors and set up a good human resource policy. Also, efficient internal control will bring about a positive change in the firm. The responsibility for all the work should not be on Mr. Day, instead it should be bifurcated.
Lohrey, J. (n.d.). Importance of Internal Control Procedures in Human Resources. Retrieved from Houston Chronicle: http://smallbusiness.chron.com/importance-internal-control-procedures-human-resources-77536.html