Auditing Fresh Food People Store

Question: Discuss about the Auditing for Fresh Food People Store. Answer: Introduction: During the recent visit at the Fresh Food People Store, it has been understood that the company provides a great selection of organic food products for the environmentally conscious consumers. The company is a well-known retailer and several numbers of stores are there throughout Australia. Since its establishment in 2012, the food is enriched with highest nutrition value. Now the company has applied for listing on the Australian Stock Exchange. All the stores are located different parts of the country including larger towns and major cities of Australia and thus, the company is facing a huge demand of organic products among the regular consumers. Managing inventory effectively for ensuring highest on-shelf availability at their store is the main objective of the company. The entire onsite inspection took 10 days and three visits were arranged to gather full information about the inventory count of the store. The Fresh Food People Store has been responsible for retailing and distribution services for the local residents of Sydney. Hence, all inventories are finished goods which are stored initially at the go-down and then such inventories are placed in the shelf of the store. There are two types of risks associated with this business operation including supply chain risks and product related risks. The product may be damaged during the products journey from go-down to store like theft, stolen and so on. Therefore, there is a risk of physical stock inadequacy at the store of the company. Secondly, the growth of the business completely depends on organic food lovers. Thus the risk is associated with the demand of such food items. The company, however, managed risks effectively, which are related to the physical security of the inventory. For instance, the management of the company has recently conducted a program related to the periodic inventory checking processes. However, this is not a c omprehensive approach to manage physical count of inventory. By arranging no-notice inspections can ensure better integrity of such inventories. On the other hand, all the sensitive and confidential details about the inventory needs to be protected with the implementation of lock-tight data security and reliability system procedure. The cyclical inventory reviews system needs to be verified by the management of The Fresh Food People Store to maintain complete records of the inventory. In short, it is highly desirable that the management needs to undertake advanced physical security and inventory control mechanism to safeguard the collections of inventories. However, it has been found that staffs have not conducted cyclical inventory reviews and thus there is an absence of complete inventory records. This is a major inventory related problem of The Fresh Food People Store which has been identified during the onsite inspection of inventories. The difficulty of undertaking several number of inventory count has become larger due to diverse store locations. Furthermore, the company has faced several problems with the annual check inventory system approach. During the annual physical count process, the company needs to shut-down their current operations and then restart the operation. It has been observed that the entire approach is costly and risky as well. It would be very difficult to reconcile inventories at different stores because discrepancies can be happened at anytime during the annual stock checking procedure. During the inspection, it has been faced difficulties to count inventories during the seasons of holidays. Thus the level of accuracy has not been maintained by staff at different levels. It would be easier to review and reconcile those transactions that are occurred during the present phase, rather than reviewing transactions that occurred over the course of the year. To mitigate this problem, thus, The Fresh Food People Store needs to attempt a different approach. Firstly, the cyclic inventory count procedure can be performed on the regular basis as considering the daily operations. It is further observed that the company should conduct a smooth inventory count procedure to avoid physical discrepancies. Furthermore, the management should follow the perpetual inventory system to match the physical stock on a regular basis. During the audit, however, the audit team needs to conduct a spot-check inventory by choosing the random sample approach. Bibliography An Inventory Model For Deteriorating Items Using Vendor-Managed Inventory Policy (2014) 27 International Journal of Engineering Berlemann M and Wesselhft J, 'Estimating Aggregate Capital Stocks Using The Perpetual Inventory Method' (2014) 65 Review of Economics Bernard P, Integrated Inventory Management (John Wiley 2012) Chen Y, Lu Y and Xu M, 'Optimal Inventory Control Policy For Periodic-Review Inventory Systems With Inventory-Level-Dependent Demand' (2012) 59 Naval Research Logistics (NRL) Sui Z, Gosavi A and Lin L, 'A Reinforcement Learning Approach For Inventory Replenishment In Vendor-Managed Inventory Systems With Consignment Inventory' (2010) 22 Engineering Management Journal.