BUEINSS CYCLES & INTERNAL CONTROL
Comprehensive Final Exam Project: Business Cycles and Internal Controls
1
Overview of Lowe’s
Retail store that specializes in home improvement and appliances
Founded in 1946 in North Wilkesboro, NC
2nd largest home improvement retailer in the world
Home Depot
Menards
19th largest overall retailer
3
Lowe’s Financials
$65,017,000,000 in revenue
$22,464,000,000 in gross profit
$3,093,000,000 in net income
Importance of This Project
Give Lowe’s an employee’s view
Help their business cycles run more efficiently
Business Cycle Documentation
Revenue Cycle
A recurring set of business activities and related information processing operations associated with providing goods or services to customers and collecting cash in payment for those sales.
Four major activities in the revenue cycle
Sales order entry
Shipping
Billing
Cash collection
Expenditure Cycle
A recurring set of business activities and related info processing operations associated with the purchase of payment for goods.
Activities of the expenditure cycle
Ordering goods
Receiving goods
Paying for goods
Production Cycle
A recurring set of activities and information related to manufacturing products.
Four basic steps in a production cycle
Product design
Planning and scheduling
Production operation
Cost accounting
HRM/Payroll Cycle
A set of business activities and related data processing operations associated with effectively managing the employee workforce.
Internal Controls
Controls Against Computer Fraud & Abuse
Employee ID number and password to access computer terminals
Only employees can access info
Answer 2 security questions when logging in remotely
Prevents masquerading and impersonation
Block unapproved websites
Prevents malware or viruses
Control and AIS
Preventative
Hiring qualified personnel
Segregation of duties
Detective
Double-checking cash counts
Preparing accurate deposit slips
Corrective
Maintain printed and digital copy of a customer’s order
Controls for Information Security
Accounting info is restricted to specified individuals
Physical and technological
Only managers have access to organizational info
Not entire access
Customer info
Only used by those collecting payment
Employee info
Only HR can access employee sensitive info
Confidentiality and Privacy Controls
Follows GAAP
Publicly traded on NYSE
Training
One week training at beginning
Recurring training videos have due dates
Description, Table, & Recommendations
Narrative Description
Revenue Cycle
In this cycle, Lowe’s receives orders for merchandise from customers. A sales associate will then pick the order and take it to the back to be shipped out by an external source like FedEx or UPS. Lowe’s will then receive payment for the product, record it, and deposit it into the bank.
Expenditure Cycle
In this cycle, Lowe’s acquires the inventory/merchandise it needs to sell to customers. Inventory will be automatically ordered by the computer system if it notices they are low or by a department manager. Once receiving takes the inventory off the delivery trucks, the inventory is placed on store shelves where it is set to sell.
Production Cycle
This is the cycle that deals with order and producing special orders. When a customer wants a product that Lowe’s does readily carry, they special order the product. The special order is sent to an external source who constructs the product and delivers it to the customer.
HR/Payroll Cycle
This cycle is done by the HR department. HR deals with hiring, firing, and training employees. Payroll is done by HR and the payroll departments. They deal with paying employees and filing taxes.
Table of Duties
| Lowe’s Employees | Computer | External Source | ||
| Revenue | Receive order Pick order Delivers order Receive payment Record Payment Deposit payment | X X X X X | X X X | X X |
| Expenditure | Request inventory Order inventory Deliver inventory Receive inventory Store inventory Pay for inventory Update AP | X X X X X X | X X | X |
| Production | Receive special order Enter special order Build special order Ship to customer Cost accounting | X X X | X | X x X |
| HR/Payroll | Clock in timecard Approve timecard Update payroll Update tax rates Pay taxes Prepare payroll Disburse payroll Prepare benefits Disburse benefits | X X X X X X X X X | X |
Recommendations
Maintain better inventory records
Implement lean or pull manufacturing
Install security cameras on the side of the building
Update computer system and software