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Walmart Recommendations

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Free «Walmart Recommendations» Essay Sample

The audit investigations conducted at Walmart Corporation brought about several findings. One of the most significant findings is that Walmart remains ahead of Target in terms of sales per annum. More so, most of the functions, including the accounts receivables and the accounts payables, are effectively segregated, hence leading to perfect operation in the company. However, a bribery scandal involving the Contracts Manager in Mexico was revealed in the course of investigations, hence indicating some of unethical activities happening at the company. This bribery led to the decline of the company’s profitability margins in 2014, as compared to 2013. Therefore, it is vital for the company to understand the best ways of improving efficiency, economy, and effectiveness in different aspects of its operations, including corporate governance, the segregation of duties, and working with the external auditor.

The current paper offers recommendations to Walmart’s management on how operations could be run more efficiently, economically, and effectively in light of the findings of the audit investigations.

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Corporate Governance

Corporate governance refers to the system of rules and practices that the board of directors relies on to promote fairness, accountability, and transparency in the company’s relationship with various stakeholders, including customers, shareholders, government, and community. Firstly, it is recommended that the company review its rules of procedure annually to ensure they are adequate and match the industry standards. In the course of investigation, it was established that the management has been keen to maintain a perfect relationship with customers through a low price strategy. However, this might not be economical to the company, despite its large sales volume per annum. Rittenberg, Johnstone, and Gramling (2011) confirm that thee review of rules relating to the procedure of dealing with the interests of customers would be more economical in instances where the company is ready to review them and match industry standards, similar to other company’s such as Target. The continuous use of the unfair low price strategy to create positive relationships with customers would continue affecting the amount of profitability generated every year, which is uneconomical.

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Secondly, it is recommended for the company to adopt an open and transparent information strategy to communicate with all its stakeholders in the most efficient manner. Efficiency would be achieved with an open and transparent communication strategy that lays all the information bare before the eyes of all stakeholders. The audit investigation revealed that the senior management still uses secret and unethical strategies to maintain its leadership in the retail industry. This goes against its anti-corruption policy that has been clearly laid out in the organization. In the future, efficiency of operations would be improved with a clear and transparent communication strategy that eliminates suspicion from the government, the community, and competitors, such as Target.

Lastly, Walmart should embrace regular dialogue between members of management and its shareholders. This would go a long way into ensuring the effectiveness of the company, as it tries to balance the attitudes and interests of shareholders. The audit investigation revealed that there has been transparency in the company’s corporate strategy through its board of directors and the executive framework. Rittenberg, Johnstone, and Gramling (2011) assert that this could be improved through regular communication between investors and the company. Effectiveness would be enhanced when all the information relating to the required finances and the levels of profitability are regularly posted on the company’s website for investors to understand that their stake in the company is protected.

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Segregation of Duties

This is a significant internal control for the success of any given business. The results of the audit investigation revealed that the company has segregated its duties properly because of the possession of adequate human resources. However, some improvements could be made to attain efficiency, economy, and effectiveness in operation of human resources in their respective areas of work.

The first significant recommendation is that the company should separate the duty of contract negotiation with the actual payment for the permit. In this case, the fraud in Mexico seemed to occur because of a single person performing several responsibilities, such as negotiating the contracts and paying out the money. Separating this duty would lead to more economical operations, as the company would avoid the unnecessary loss of its cash to individuals like Mr. Marcus. In the interview with Jose, it was clear that Marcus was often involved with invoices, which was beyond his duties. According to Rittenberg, Johnstone, and Gramling (2011), segregating this duty would be crucial in promoting economic operations because the finances of the company would be secured through procedural operations.

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The second recommendation is that a separate computerized system of the accounts payable should be maintained to avoid bribery and other fraudulent deals. In the findings, it seemed a lot of paper work was still involved in the preparation of invoices. However, efficiency would be attained in cases where functions, such as the accounts receivable and the accounts payable and separated effectively through a computerized system. Marcus would not have been involved with the invoices in cases where a perfect computerized system existed, hence restricting him.

Lastly, the segregation of duties should be done in such a way that every person is placed in his/her area of specialization. Rittenberg, Johnstone, and Gramling (2011) reiterate that it would be crucial to place every individual in their respective areas of specialization to promote effectiveness in the performance of their respective functions. As much as the accounts payable are segregated from the accounts receivable, effectiveness cannot be attained, unless the right individuals are put in these positions. Therefore, all employees must be identified with their respective qualifications and placed in different departments of the organization to enhance effective operations that match ethical standards of the industry.

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Working with the External Auditor

The external auditor is an independent audit professional who works in line with the underlying accounting standards and principles to confirm a view on whether the financial statements of the company give a true and fair view. The audit investigations at Walmart revealed incidences of unethical conduct among members of the management and activities of bribery that lead to the alteration of information on journal entries by the parties involved.

Firstly, the external auditor is able to work independently without the influence of management, hence leading to efficient operations within the company. Rittenberg, Johnstone, and Gramling (2011) are of the view that it would be more efficient for the company to work with an external auditor because he is able to identify the key areas of weakness independently. This would be more efficient, compared to working with internal auditors who are usually controlled by management. For instance, the bribe incident would be effectively detected, hence leading to efficient and smooth operations all over the organization. The management should take advantage of the general meeting to ensure an external auditor is appointed to improve the company’s efficiency.

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Secondly, external auditors are governed by accounting standards and principles in terms of the audit fee they charge. This would make the audit function in the company more affordable. The company would not be required to spend much on the external auditor because these amounts are fixed in the initial stages of operation. Walmart should aim at getting a professional external auditor, but must be careful to ensure he works independently. Rittenberg, Johnstone, and Gramling (2011) emphasize that the professional ethics play a vital role in ensuring auditors only collect the standard fee from their clients. The company would be in a perfect position to save on its resources by working with external auditors. Economy would also be ensured through the prevention of loss of cash through unethical activities, such as bribery, hence leading the company to realize its goals as a top retailer in the industry.

Lastly, it is recommended that the company works with the external auditor to ensure compliance with the industry standards. It is clear from the report that the financial ratios were not consistent with the industry standards. Rittenberg, Johnstone, and Gramling (2011) opine that working with an external auditor would ensure effectiveness in the operation of the company because it would be in a better position to comply with all the required standards. For instance, the company’s involvement in unethical activities on Wall Street would be assured through the quality work of the external auditor who tends to be more consistent in operations. Therefore, the company should ensure that external auditor is brought in to enhance its effectiveness in terms of compliance.

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In conclusion, Walmart remains the largest retail company in terms of sales. In Mexico, it is the largest private employer. However, some issues still need to be improved, as identified in the audit investigation. Different areas, including corporate governance, would be improved through clear and transparent communication systems, review of the corporate procedures, and enhancement of open communications. More so, duties should be more segregated to avoid the conflict of interest among members, such as Marcus, the Contracts Manager. Individuals must be placed in their respective responsibilities according to their qualifications. In terms of working with the external auditor, the company must move in this direction to promote accountability and independence in the disclosure of its information in the market.

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