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A process map is a description of an audit-sensitive process. The description usually contains the process objectives, activities, data streams, and auditing or accounting impact. It aids the auditor in understanding the process and setting materiality levels. The materiality level will depend on the level of risk posed and the variability of the process. The Starbucks Process Map is based on its primary value chain activities. Each process is analyzed in detail, focusing on the accounting and hence audit significance. The primary activities are operations, inbound logistics, outbound logistics, and marketing. They are all critical to the achievement of business goals hence pose increased audit risk.
These activities are concerned with the acquisition of coffee for processing. Ineffectiveness in this part will spill over to the next part. To avoid this, Starbucks has several process objectives. They include creating and maintaining good relationships with coffee farmers, purchasing quality coffee at the lowest possible prices, creating and maintaining good working relationships with coffee exporters, and ensuring timely delivery of coffee beans to all Starbucks outlets.
The process objectives dictate the process activities. Inbound logistics in Starbucks involves activities such as identifying prospective exporters, comparing various prices, meeting exporters, and transporting coffee from the factory to stores. The data streams are information sources for the process in question. Inbound logistics has several data streams including supplier price lists, requisition forms from Starbucks outlets, and Freight insurance contracts.
Purchasing and transporting coffee beans are routine transactions in inbound logistics. Meeting with prospective suppliers in a bid to create relationships costs money. However, it is not a routine transaction. Non-routine transactions result in accounting estimates, which increase audit risk. An example of an accounting estimate in inbound logistics is the administrative cost of purchasing.
Starbucks operations are conducted in the factories where coffee beans are roasted and blended. The process objectives are such as to ensure coffee quality is maintained, to minimize the number of defects during coffee roasting, to ensure manufacturing is done at minimal cost, and to utilize technology in manufacturing.
The activities involved in achieving these objectives are roasting coffee, coffee blending, and packaging coffee. The data streams for these activities are quality reports, job order forms, manufacturing budgets, and standard and variance costing reports.
The accounting impact of operations transactions is classified into routine and non-routine transactions. Routine transactions occur repetitively and their cost can be predicted with reasonable accuracy. Examples are materials requisition, replacing worn-out machinery, labor costs, and the cost of new machinery. Non-routine costs include the cost of repairing machines that have broken down and idle-time costs. The accounting estimate that poses the greatest audit risk is depreciation. This is because it greatly affects the cost of assets on the Statement of Financial Position.
The process objectives are to make deliveries on time, to ensure all retail coffee shops are managed efficiently, and to increase online sales. These objectives are achieved through the process activities of distribution to wholesalers, distribution to lone internet buyers, and distribution to Starbucks stores. All these activities are concerned with getting the product to the customer.
The information feeds for outbound logistics include customer orders, receipts, invoices, delivery notes, and promissory notes. The routine transactions with accounting impact are the sale of coffee in Starbucks outlets, sales to wholesalers and airlines, and payment of utility bills in outlets. The major accounting estimate in outbound logistics is the cost of bad and doubtful debts. It presents an opportunity for window dressing and should be dealt with carefully.
Marketing and sales
The process objectives of sales and marketing are:
- To inform prospective customers of Starbucks products
- To remind current customers to keep purchasing Starbucks coffee
- To respond to customer complaints
- To recruit and maintain highly talented salespeople and marketers
- To determine customer needs and trends in the market so the company can take advantage of these
- To maintain the Starbucks brand awareness
These objectives are achieved through carrying out advertising campaigns, public relations exercises, issuing free samples, and handling customer complaints. The process data streams are sales budgets and targets, customer feedback forms, and market surveys. Routine transactions include payment of salaries for sales staff and payment for billboards. Significant accounting estimates are made in calculating the cost of refunds. This room for subjective decision-making presents opportunities for manipulation.
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