Evaluating Cost Reductions
PPC is a small public plastics manufacturing organization which. The organization first became a publicly listed organization three years ago, and has experienced a large impact of the recent recession. The organization has taken several steps within the past year to reduce costs. The question has arisen as to whether said cost reduction actions are an operation issue or a control deficiency, of if said cost reductions are a material weakness or a significant deficiency in the organization’s internal control.
PPC Cost Reductions As a result of the recent recession PPC’s revenues have shrunk $125 million. Such reductions in revenues have caused the organization to become minimally profitable. Moreover, the organization …show more content…
As such, hourly wage reductions do not directly violate internal control procedures. Moreover, wage cutbacks are common in times of financial crises to minimize the need to increase numbers of employees the organization must layoff. Consequently, employee morale can be affected by such cuts. Employees experiencing a wage reduction may therefore become less productive further hindering the profitability of the organization.
Additionally, employees may look on such reductions of wage as mistreatment by management (Kube, Maréchal & Puppe, 2013). Employees who perceive mistreatment through wage reductions are less inclined to maintain productivity and conformance with requirements of the organization. Should said employees be responsible for implementing internal controls of the financial reporting, the wage reductions would then constitute a material weakness or significant deficiency in internal control.
Board of Director …show more content…
As such, internal control responsibilities were transferred to process owners in charge of accounts payable. The process owners were charged with the responsibility to evaluate the quality of controls within their work areas in an objective manner. The results of said evaluations are to be utilized by management in reporting internal control effectiveness. Such a cost reduction, while saving the organization $450,000, may result in larger costs due to illegal activities as a result of oversight by unbiased parties. Process owners should take responsibility for the internal controls of their area. However, the internal control department provides the required objectivity in overseeing said process owners through ensuring adequacy and testing of the internal control framework. Therefore, eliminating the internal control department would become a material weakness in the face of Securities and Exchange Commission (SEC) regulations for public
PPC is a small public plastics manufacturing organization which. The organization first became a publicly listed organization three years ago, and has experienced a large impact of the recent recession. The organization has taken several steps within the past year to reduce costs. The question has arisen as to whether said cost reduction actions are an operation issue or a control deficiency, of if said cost reductions are a material weakness or a significant deficiency in the organization’s internal control.
PPC Cost Reductions As a result of the recent recession PPC’s revenues have shrunk $125 million. Such reductions in revenues have caused the organization to become minimally profitable. Moreover, the organization …show more content…
As such, hourly wage reductions do not directly violate internal control procedures. Moreover, wage cutbacks are common in times of financial crises to minimize the need to increase numbers of employees the organization must layoff. Consequently, employee morale can be affected by such cuts. Employees experiencing a wage reduction may therefore become less productive further hindering the profitability of the organization.
Additionally, employees may look on such reductions of wage as mistreatment by management (Kube, Maréchal & Puppe, 2013). Employees who perceive mistreatment through wage reductions are less inclined to maintain productivity and conformance with requirements of the organization. Should said employees be responsible for implementing internal controls of the financial reporting, the wage reductions would then constitute a material weakness or significant deficiency in internal control.
Board of Director …show more content…
As such, internal control responsibilities were transferred to process owners in charge of accounts payable. The process owners were charged with the responsibility to evaluate the quality of controls within their work areas in an objective manner. The results of said evaluations are to be utilized by management in reporting internal control effectiveness. Such a cost reduction, while saving the organization $450,000, may result in larger costs due to illegal activities as a result of oversight by unbiased parties. Process owners should take responsibility for the internal controls of their area. However, the internal control department provides the required objectivity in overseeing said process owners through ensuring adequacy and testing of the internal control framework. Therefore, eliminating the internal control department would become a material weakness in the face of Securities and Exchange Commission (SEC) regulations for public