Write a 5 page essay on Audit related issues facing Groupon company.Download file to see previous pages... The interested customers then purchase the coupons electronically using their credit cards or

Write a 5 page essay on Audit related issues facing Groupon company.

The interested customers then purchase the coupons electronically using their credit cards or paypal which they present in those restaurants. The firm has experienced tremendous growth since its inception with expansion in over five hundred markets in about forty seven countries worldwide. In the first year of its establishment, it managed to receive revenue worth $15 million which had never been witnessed by other players in the same industry (Garner, 2008). However, it has began to experience numerous challenges including a significant drop in the price of its shares in the New York Stock exchange market after its Initial Public Offer (IPO) in the year 2011 in the month of November. Stiff competition from its major competitors such Google and LivingSocial have further pushed down the pre-tax profits of Groupon. These firms quickly adopted the techniques used by Groupon and have since emerged stronger than it. Current problems experienced by Groupon can be traced to internal control failures according to the Chicago Tribune dated September 24th 2013. Internal control failures After registering low revenue than expected in its third quarter financial report, the management of the firm admitted to weak system of internal controls as the main cause of the decline in revenue. The admission was made to the United States Security and Exchange Commission (S.E.C) as they sought to explain their untimely report. The true picture of the firm was revealed after an external audit was conducted by Ernest &amp. Young who revealed serious internal control failures over financial reporting. The company’s spokeswoman also blamed the poor internal controls for being the cause of lack of accuracy in the accounts. The company experienced a number of failures which led to a decrease in the earnings per share of its stock from 12 cents per share to 8 cents per share. As the company expanded, many internal control initially set up were not followed accordingly. Some specific internal control failures include inability to regulate the percentage discounts on each coupon as the demand for its services increased (Graham, 2011). The firm failed to monitor its sales as well as to keep track of its financial records. Some coupons could be sold at a loss leading to insufficient funds for the firms operations. Some firms terminated their contracts with Groupon as its shares began to decrease in value leading to a decline in its customer base. Before its Initial Public Offer, the firm introduced new protocols in its accounting procedures in a bid to paint an attractive picture to its prospective investors without checking the new system’s accuracy and reliability. In that case, there was no smooth transition between the old and the new accounting protocols and as a result some old systems were still in use. Specific solution There are several steps that the auditors of Groupon would have taken in order to avoid such failures in the internal control systems. First, there was a need to involve all stakeholders including its customers, shareholders and employees so as to seek their opinion before introducing any change in the internal controls. This would have assisted in improving and maintaining the trust of its employees and customers thus contributing in making them feel part of the firm. The main challenge with this approach is that it requires a lot of time to undertake as well as resources (Whittington, 2012). The second approach is to adopt the use external and more independent auditors after the internal auditors have done their part.