Case Study
Career Training is a private registered training organisation (RTO) based in Geraldton, Western Australia. Career Training is recognised as an industry training leader delivering nationally recognised and specialised courses. Registered training organisations (RTOs) are the training providers registered by ASQA (or, in some cases, a state regulator) to deliver nationally recognised vocational education and training (VET) services.
Career Training provides qualifications in various subject areas, including business, community services, information technology and hospitality. There are currently 400 students enrolled across a wide range of courses. There are 35 staff members, including training staff and administration.
The levels of qualifications provided are as follows:
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Certificates I, II, III and IV
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Diploma
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Advanced Diploma
Career Training follows the important standards of the industry and focuses on supporting informed decisions, engagement and participation. The RTO applies a systematic approach to ensure quality across all training and assessment services, including staff and systems. It seeks feedback from students and internal staff on a monthly basis and conducts internal audits of the company’s policies and procedures to ensure compliance against the standards for registered training organisations.
Context of the Assessment
Computer software requirement
The current accounting information system used by Career Training has not been able to provide adequate and sufficient analysis of its revenue and expenditure that has led to difficulties in making informed estimates of future profits.
The future estimates of the company’s profits are not based on statistical figures and facts. They are merely predictions of top management. The board of directors feel that to have more realistic figures on the company’s future growth and profit, they need to use accounting software to analyse previous years’ results and trends. This will not only help them to identify the future profits but will also help them to expand the business.
So, they have decided to use a new system that can manage the financial information more effectively and have the capabilities to analyse the data and provide realistic statistics to create budgets and forecasts to provide the owner and leadership team with the ability to measure where the company was at and where it is headed financially. The senior management team believe that better information will allow them to prepare for the future, allocate resources more efficiently and improve profit margins.
The senior management wants you to recommend a new system. They have provided you with the guidelines for the selection of the new system. The system must:
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comply with all the legislative requirements.
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calculate all payroll requirements
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prepare information for compliance requirements
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track stock, work in progress, orders, jobs and other task management requirements
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handle multiple bank accounts and automatically imports and processes bank data
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be able to produce separate financial reports for each business or department within the business
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easily integrate with other systems you are operating such as online payments, point of sale equipment, customer relationship management records, stock records and payroll software
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keep detailed records on clients
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allow you to manage permissions so that users only have access to the parts of the system that is relevant to their work
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allow users to securely access data remotely (cloud computing)
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have no ongoing license fees
They are well aware of the fact that checking the software for the requirements will take time. The new budget is also expected to be projected this month. So, they want this to be done after the preparation of the budget for the year 2021/2022.
Assume that you have been appointed as the Business Manager at Career Training and you need to prepare budgets and establish audit trials for the organisation.
Task 6. (Part A) Budget Variance Report
Additional scenario
After the end of the first quarter of the financial year, the CEO of the company called up a meeting to discuss the analysis report provided to him by the accountant of the organisation.
This analysis report includes the outcomes of the actual budget analysis for the first quarter budget. The outcomes of the analysis report outcomes are not as expected.Following are some of the vital outcomes:
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Sales are 3% less than budgeted.
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Gross profits have been impacted as the expenses are the same, but sales have gone down.
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The company had most part of their loan on variable interest rates. The interest rates have increased, and that has impacted the interest expenses. The interest expense for this quarter is increased by $4500.
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To maintain the sales the stores had to further give discounts of 5% on each item. That has impacted the budget.
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Other actual expenses were the same as allocated.
You had a discussion with the CEO. You both have agreed that this is largely due to the following reasons:
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Theeconomy overall is in a recession that is impacting the sales in the retail sector.
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The first quarter isgenerally impacted by the factors relating to public and school holidays.
The CEO is also concerned about the outcomes of the audit trial conducted by one of the internal auditors.Some of the outcomes are as follow:
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Cash record books are notmaintained properly.
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Some of the times, the company books andthird-party bank statements were not reconciled appropriately.
Your task:
Considering the outcomes of the analysis report, the CEO of the company wants you to prepare a
budget variance report
Download budget variance report
to manage risks that may occur in the organisation in case of misappropriation of the funds.
This is also to be done to maintain audit trails for accurate tracking and identification of discrepancies between agreed and actual allocations.
You are required to perform the following tasks:
Prepare the following:
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o
Budget variance report,
o
GST Cash Flow Budget variance report
o
(RENAME the templates appropriately at the top to align - use the budget variance report in this task, and you can refer to templates in Task 3 as well)
You must make sure that when conducting an audit trail, you comply with due diligence in reviewing financial statements.
You will be required to complete:
You are required to complete
the two (2) templates as outlined above
andsubmit the completed reports through the portal.