POSTED: Monday, September 25
DUE: Monday, October 2
@ 7PM through Turnitin (MY E-CLASS)
INDIVIDUAL ASSIGNMENT #1 (3%)
Bartosz Amerski is an internal auditor employed by WII-FII Industries. He is nearing completion
of an audit of one of its manufacturing divisions (TIE-DYE) during the first 6 months of the
calendar year. TIE-DYE is one of five (5) manufacturing divisions in WII-FII Industries, and
manufactures approximately 40% of WII-FII's sales in the year.
WII-FII Industries has two (2) marketing divisions (international and domestic) and a technical
service division that offers technical support. Each customer is assigned to the most suitable
manufacturing division, which functions as the supplier for that customer. The manufacturing
division then approves the customer's credit, ships against orders obtained by the sales
representatives and collects the customer receivables when due. This allows order-to-order
monitoring of customer credits limits against customer orders received.
There are two (2) items that concern Bartosz. Firstly, there was a material dollar amount of
inventory of part 'X5' still carried on the TIE-DYE books at year-end, despite the fact that 'Xylo-
FI' machining component in which part 'X5' was used is now considered second generation and
is no longer manufactured. Company policy requires an immediate write-off of all obsolete
inventory items. And secondly, some accounts receivable still carried as collectible at year-end
were more than 180 days old. All receivables are due in 30 days, which is standard for the
industry. Bartosz believes many of these accounts are uncollectible.
The division manager's administrative assistant, Shahir Kazemi, performed the aging of accounts
receivable rather than the division accountant, as is standard practice. The division accountant
refused to discuss the circumstances of Shahir's actions.
Bartosz scheduled a meeting with Shahir to discuss his concerns. "Well, Bartosz," Shahir
responded, "I know that policy requires that obsolete inventory be written off, but part of 'X5' is
just not being used at present. We might start to make those 'Xylo-FI' components again. Who
knows? The 1990s baggy suits are coming back into style again, aren't they?! 'Xylo-Fi' could,
too. There are plenty of customers, especially in the third world, that are finding those second
and third-generation machines pretty expensive to maintain. I mean, there is a policy that states
obsolete inventories should be written off, but there is no policy defining an obsolete part."
"And as for those receivables," Shahir continued, "that is certainly a judgment call, too. Who
knows if those accounts will be collected? With the pandemic still in play, we're in slight
recession now. When things pick up, we'll probably collect a few. There isn't even a policy in this
division on writing off receivables. I checked. Nothing says I have to write them off...so who are
you to say I have to?"