Retail Audits Identify and explain the difference(s) between horizontal and vertical audits. Horizontal audits and vertical audits are distinct approaches to examining financial records within an organization. A horizontal audit focuses on a specific process or function across various departments or units. For example, it may scrutinize the procurement process in different divisions. In contrast, a vertical audit concentrates on a particular department or function from top to bottom. For instance, it may evaluate the entire finance department, encompassing processes from budgeting to financial reporting. Explain the ways that customers and stakeholders might benefit from the changes that result from conducting an audit. Conducting an audit yields several advantages for both customers and stakeholders. An audit has various benefits for both customers and stakeholders. Firstly, it increases transparency and trust. Customers are more likely to have faith in a company that conducts frequent audits to ensure that their financial activities are appropriately recorded and reported. This trust extends to stakeholders such as investors and creditors, who rely on accurate financial data to make informed decisions. Second, audits lead to process improvements. Internal control inefficiencies and weaknesses are detected and corrected through rigorous investigation. This results in increased operational efficiency, cost savings, and, eventually, better products and services for customers. Why are physical audits necessary? Physical audits are crucial for verifying the existence, quality, and location of tangible assets, particularly in sectors such as retail, where inventory accounts for a significant portion of a company's asset base. By physically counting and inspecting items, organizations can pinpoint any disparities between recorded inventory levels and actual physical stock. This careful process not only protects against financial inaccuracies, but it also serves as an important defense against concerns like as theft, 1
Retail Audits damage, spoilage, or unintended record-keeping errors, eventually assuring the integrity of a company's financial accounts. Who should managers involve when creating an audit? When designing an audit, it's vital for managers to engage a diverse group of stakeholders. Internally, department heads and process owners are invaluable resources as they possess intimate knowledge of their specific areas within the organization, offering granular insights into processes and controls. Externally, auditors and consultants provide an impartial perspective, leveraging their expertise to evaluate procedures, detect potential risks, and provide expert recommendations for improvement. Regulatory bodies and industry experts contribute vital insights by offering guidance on compliance requirements specific to the industry and industry best practices, ensuring the audit aligns with legal standards and benchmarks. This collective involvement ensures a comprehensive audit process that draws on a range of expertise, resulting in actionable recommendations to enhance financial integrity and operational efficiency. 2
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