The internal audit staff of a consumer company recently completed an audit of the company's centralized...

 

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The internal audit staff of a consumer company recently completed an audit of the company's centralized marketing department. The audit objective was to assess the effectiveness of the marketing department in contributing to the company profitability. The company's three divisions manufacture and distribute consumer-oriented electronics, sporting gods/recreational products, and small household appliances. All three divisions are dependent upon aggressive marketing to retain their market share in a highly competitive environment. The audit field work identified, and management agrees with, the following: Sales Promotion 1. The procurement of outside printing services is subject to competitive bidding if the dollar amount is greater than $4,000 and deadlines permit. Otherwise, the media manager selects the printer based on past experience. The contract is handled via the phone and the media manager informs the accounts payable supervisor that payment to the printer is authorized. 2. Last year's advertising expenditures exceeded the budgeted amount by 8 percent in all three divisions. An overall advertising strategy for the company's products has not been developed; each divisional director plans its own advertising activities. 3. Advertising activities are not studied for overall cost/sales effectiveness. The marketing managers believe that the time between placing ads and seeing any response is too long to permit a useful measure. Distribution Channels 4. Although each product line is distributed through several channels, distribution costs are accumulated by product line; the product line manager decides what the appropriate channels are for each product within the line. 5. The company uses multiple warehouse facilities and each product line uses an expediter to release products from each warehouse. To date, no storage or transportation studies have been done to ensure product delivery at the lowest possible cost. 6. Product prices are determined by each division subject to committee approval from headquarters. Pricing strategy usually focuses on competitors' pricing; other pricing determinants are seldom examined. Required: For each of these situations, prepare findings and the audit recommendations. Use the following format in preparing your response: а. b. FINDINGS RECOMMENDATIONS 1. 1. 2. 2. The internal audit staff of a consumer company recently completed an audit of the company's centralized marketing department. The audit objective was to assess the effectiveness of the marketing department in contributing to the company profitability. The company's three divisions manufacture and distribute consumer-oriented electronics, sporting gods/recreational products, and small household appliances. All three divisions are dependent upon aggressive marketing to retain their market share in a highly competitive environment. The audit field work identified, and management agrees with, the following: Sales Promotion 1. The procurement of outside printing services is subject to competitive bidding if the dollar amount is greater than $4,000 and deadlines permit. Otherwise, the media manager selects the printer based on past experience. The contract is handled via the phone and the media manager informs the accounts payable supervisor that payment to the printer is authorized. 2. Last year's advertising expenditures exceeded the budgeted amount by 8 percent in all three divisions. An overall advertising strategy for the company's products has not been developed; each divisional director plans its own advertising activities. 3. Advertising activities are not studied for overall cost/sales effectiveness. The marketing managers believe that the time between placing ads and seeing any response is too long to permit a useful measure. Distribution Channels 4. Although each product line is distributed through several channels, distribution costs are accumulated by product line; the product line manager decides what the appropriate channels are for each product within the line. 5. The company uses multiple warehouse facilities and each product line uses an expediter to release products from each warehouse. To date, no storage or transportation studies have been done to ensure product delivery at the lowest possible cost. 6. Product prices are determined by each division subject to committee approval from headquarters. Pricing strategy usually focuses on competitors' pricing; other pricing determinants are seldom examined. Required: For each of these situations, prepare findings and the audit recommendations. Use the following format in preparing your response: а. b. FINDINGS RECOMMENDATIONS 1. 1. 2. 2.