Essay

Executive Summary 3.1 Following a thorough review of the accounts department and, in particular, the petty cash system, a number of weaknesses were identified. The major weakness with the current system is that the petty cash is loose in the drawer of the receptionist who is often away from her desk dealing with clients. Other weaknesses are identified within the report. 3.2 By not having a set procedure for the safeguarding of petty cash, or the reconciliation thereof, fraud could easily be committed which may result in cashflow problems for the business and the misstatement of the expenses in the Income Statement. 3.3 There are several recommendations which are discussed later in the report, the most significant of which is to hold all petty cash, under an Imprest system preferably, in a secure tin which is to be kept in a locked drawer within the accounts department, away from non-staff members. It is also recommended that the responsibility for maintaining the petty cash is given to the Assistant Accountant and the reconciliation to the Financial Accountant. 3.4 Subject to all the recommendations being implemented, the initial cost savings are estimated to be in the region of £39,000. This will be an ongoing benefit. 6 4 Introduction 4.1 Kaplan Financial is one of the largest accountancy tuition providers in the UK and is owned by the Washington Post. The Washington Post has several businesses within its portfolio, each operating as a separate autonomous business unit. 4.2 In terms of Kaplan Financial, the main stakeholders are the customers who send their students to the company for training, and the government agencies who manage the funding for the Association of Accounting Technician (AAT) qualification. Other qualifications provided include the Chartered Institute of Management Accountants (CIMA); the Institute of Chartered Accountants of England and Wales (ICAEW) and the Association of Chartered Certified Accountants (ACCA). The tutors are also important stakeholders as they are responsible for the delivery of the product. Other stakeholders are the shareholders, suppliers and the accountancy bodies themselves. 4.3 The accounts department oversees all the financial functions of the business and is responsible for accurate record keeping of the day to day transactions. The department is divided into several key areas (see appendix 2) with each section being responsible for a different section of the accounts; Accounts Payable (AP), Accounts Receivable (AR), Financial Accounting and Management Accounting. The reception staff are also direct reports of the Financial Accountant (FA). 4.4 Whilst it is the responsibility of the Cost Centre managers, heads of each Kaplan centre, to generate their own sales and procure their own study materials, consumables and utilities, the accounting function is there as a centralised point of access to consolidate the information and ensure that customers pay on time, suppliers are paid promptly and the overall results of the business are correctly stated. 4.5 The following financial statements are produced: 4.5.1 An Income Statement (IS) is produced showing the overall revenues and expenses for the company as a whole. The IS will summarise all the various revenue streams, found by each of the products provided by the company at each of its locations, into an overall turnover figure. Each cost centre will receive its own individual IS to help them achieve their budgets, prepared on a quarterly basis on a participatory basis. 7 4.5.2 A Statement of Financial Position (SOFP) is produced annually to show a snapshot of the assets and the liabilities of the company as a whole. All assets and liabilities are separated into current and non-current and the equity section of the SOFP details the total amount available to the owners of the business. Any business valuations are based on the SOFP. 4.5.3 The company produces a Cashflow statement, in accordance with IAS 7. This statement will inform current, and potential, investors of the liquidity of the business and examine where cash has originated from and where it has been distributed to. It also attempts to reconcile the profits of the organisation with the cash position which can then be used to determine whether cash is being generated from the normal trading transactions of the business, or from other sources. 4.6 Organisational policies are found in training manuals in each financial function and it is the responsibility of the FA to ensure that any new methods of work or process improvements are both communicated to staff and updated in the manuals. Whenever a new member of staff joins the department they must read the employee handbook and sign that they acknowledge the procedures therein. The Group Finance Director (GFD) has overall responsibility for the compliance of the accounting staff and will include some Continuing Professional Development (CPD) goals into each of his staff’s appraisals. 4.7 If the team require any updates on external accounting policies the FA will arrange an in-house training session or, providing it proves cost-effective, one person will be sent on an external course and they will then train the remainder of the group at a later date. 4.8 The company produces financial statements as dictated by their company status. The statements are governed by the Companies Act 2006, International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). There is also a requirement for the company to comply with the Sarbanes-Oxley Act (2002) (SOX) and US GAAP due to having a US parent.