Auditing and assessing financial condition
Revenue is defined as the amount that a firm gets at a specific time after the deductions of goods which are returned. (It is basically the money that is brought to the business)
The deterioration of revenue base may be attributed by the fact that the revenue per household is exceeded by the expenditures per household. In short words, the amount used exceeds the income. For example, in the first year, the revenue base was nil because the all the income settled the expenditures (Kay, 2007). In the second year, even though there was a decline of the sales tax as a percentage of total revenue, the revenue deteriorated. The revenue was $ 318 but the expenditures exceed and therefore $ 3 was to be added to settle the expenditures. The other years followed this trend and with the increase of revenue per household so did the expenditures exceed the revenues per household.
Legislative policies that could be used may have affected the revenue may be ghosting-it may be some households are nonexistent but their expenditures are included in the report.
There may be the overdependence of the sales of the revenue source and if there’s a slight decline in the resources so will the revenue per households be affected.
There may be some households that are made up by the board and even though there are expenditures allotted to them, they don’t contribute to the revenue (Louis, 2010). Also, the relatives of the board members may be tax-exempt households since in the last three years they have increased tremendously and this could cause changes in the tax burden (kickbacks).
Just like in the honest graft, the people concerned in the sales could making a killing in the business by playing cohorts with the buyers and registering prices far lower than the actual (Miller, 2003).
The inefficiency in the collection may be because of ‘diversion’ whereby some revenues are diverted to family members or relatives. Undesirable increment of fixed cost may put the buyers away as they will resort to other options thereby lowering the sales tax realized. There could be ineffective budgetary controls as in whereby commingled cash accounts are used in the transaction of funds for unauthorized projects or uses (John, 2007). The personnel productivity could decline as a result of the employees taking an “honest graft” to attend to their other business investments while they are supposed to be doing what they are employed for. As it happens in kickbacks the employees could assist the concerned officials in one way or the other, such as in campaigns, and in return demand appreciation through new programs that will create the need for future expenditures and channels to extort money from the company.
The decline in tax or revenue base could be attributed to the increase in the low incoming households or the relocation of the households that used to pay revenue. When it comes to the need to shift public or customer service priorities, it may that the customers may insist on buying the goods with free delivery services if and it may be that they used to settle down the delivery payments before and this will lead to the increase in the expenditure (Norman, 2010). The loss of a competitive position would lead the company trying to restore it and it would force the company to offer big discounts and it would also contribute to an increment in expenditure.
John, M. (2007). Fiscal Administration:Analysis and Applications for the Public Sector. Boston .
Kay, S. (2007). Financial management for local government: Creating a financial framework, Volume 1. New York: Earthscan.
Louis, B. (2010). The Audit Committee Handbook. New Jersey: John Wiley & Sons.
Miller, R. (2003). Public finance in developing and transitional countries: essays in honor of Richard Bird. Massachusetts: Edward Elgar Publishing
Norman, G. (2010). Financial ACCT 2010. Ohio: Cengage Learning.