Company Audit Occurs When There Is Need Case Study
- Length: 16 pages
- Subject: Business
- Type: Case Study
- Paper: #71149244
Excerpt from Case Study :
Company audit occurs when there is need to examine the performance of a big company especially the financial and the accounting records over a given period of time. Professionals such as the certified public accountant always do the auditing. The audit of a company is significant in the verification of accuracy particularly in the accounting records. A company like coca cola will need an audit to help in verifying their financial records because of the large market they are serving. Coca Cola Company is undeniably the world's largest distributor when it comes to beverages, majorly used as refreshment by the consumers. The company enjoys a larger number of distribution countries and in the number of consumers using their products. This paper gives the audit about the coca cola company. In auditing the company, there is need to study some of the agreement that the company had engaged itself in.
The contract between the coca cola company and Dr. Pepper Snapple Group
This agreement was made in the year 2010 involving the company and the Dr. Pepper Snapple Group in which the former was to pay for the distribution of some of the latter's brands. The agreement was that the coca cola company was to pay $715 million in order to take over distribution of the brands (Press Kits 2010). This is just after the company had completed the establishment of The Coca Cola Company planned acquisition of coca cola enterprises (CCE) in the North American Business; consequently, the contract was a continuation of the distribution that was started by the CCE. The distribution was aimed at complementing the action of the CCE. This agreement also involved the latter joining the innovative Coca Cola Freestyle Fountain Dispenser (Press Kits 2010). The coca cola company entered the agreement to complement on the efforts to achieve the 2020 vision of increasing the system revenue twice the present value. This would have made the company to be one of the most powerful distribution company since it would have established a strong distribution network in the world.
The terms involved in the agreement
The coca cola company had to acquire a definite agreement with the CCE in order to continue distributing the DPS's brands. This is as the result of the CCE being the initial distributor of the brands. The definite agreement would have enabled the company to take over the North American bottling business that was at the time being controlled by the CCE. The CCE would in turn acquire the company's Norway and Sweden operation, which were under the control of the latter (Press Kits 2010). The agreement between the company and the CCE could have also affected the budgeting of the company.
The coca cola company was to pay the $715 million at once in order to take over the distribution of the DPS brands. The distribution was especially aimed in the states of America and in some of the territories in Canada. These regions were prior distribution countries for CCE. The distributed brands under the license agreement were Canada Dry, C'Plus and Schweppes in Canada (Press Kits 2010). Under the agreement, the license was to last for 20 years for the initial term (Press Kits 2010). The agreement would also be renewed for 20 years being one of the most renewal periods of a contract in the world. It is also worth noting that the agreement would act as a substitute of the initially existing agreement, which was made between the CCE and DPS in North American bottling business (Press Kits 2010). This would have affected either negatively or positively on the financial position of the company because they had to spend on the agreement.
Apart from the money offered to the DPS, the company was also to offer the latter a place in the fountain accounts of the local regions, which were under the CCE. This agreement also required the company to include the Dr. Pepper and Diet Dr. Pepper in their own Freestyle referred to as the coca cola Freestyle fountain dispenser. The FreestyleTM has a term of 20-year s from the period when the agreement came into existence. The investment of the DPS's in the license agreement is estimated to be at $115 to $135 million (Press Kits 2010). This meant a profit to the partners of the agreement.
Aftermath of the agreement
On the verge of the agreement, Coca Cola Company would have established their roots in the Dr. Pepper trademark bottlers in the states of America (Press Kits 2010). The rate distribution activity of the company will also have increased since there would be uninterrupted distribution of the brands to the current customers who had a direct relation to the CCE. Consequently, the customer the CCF owning the outlets will be having a greater choice of distributing the available brands. This will essentially increase the number of customers associated with CCE.
The acquisition of the CCE was also on the verge of being closed in the last quarter of the year. This would have involved the approval from the shareholders. The CCF dispenser now has an increased capacity of dispensing an increased amount of beverages at the same time and amount. Therefore, the contract have a higher impact on the audits of the company since the company would have increased its investment and the accompanying financial records. The agreement between the company and the GPS proves important in the auditing since the difference in the company's production would have arisen from the contract. This involves the money spent in financing the agreement between the two companies
The organizational structure of the Coca-Cola Company is normally divided into dual operating groups namely the Bottling Investments and the Corporate. Moreover, the Coca-Coca Company is also operating in groups that are normally sub-divided through the method of diverse regions that are situated in North America, Africa, Latin America, Eurasia, Pacific and European Union. Every section of these prevailing divisions is further sub-divided into the geographical regions. Through the permission of the prevailing decisions are made on the major numerous local levels that the existing organization can swiftly respond to the drastic alteration of the market demands accompanied by the higher level of the management within the Coca-Cola Company that mainly focus towards the long-term strategy.
Certain prevailing divisions of the Coca-Cola Company that entails finance, innovation, marketing and strategy, human resource and planning are normally centrally situated within the existing corporate division of the Coca-Cola Company. Selective functions of the Coca-Cola Company occur at the lower levels within every regions of the company. However, most of the significant decisions of the company is normally prepared at the top of the hierarchy of the company. The corporate headquarters of the Coca-Cola Company has given the mandate to the prevailing local divisions in undertaking the advertising decisions. This aids every division to exclusively design commercials and advertisements that would attractive to the existing local market.
The Coca-Cola Company is normally categorized as a corporate segment that is entirely responsibility of granting the company an overall direction accompanied by the provision of the support that pertains to the regional structure. The chief strategic decisions within the Coca-Cola Company are normally made through the prevailing Executive Committee that comprises twelve company officers. The twelve member executive committee officers aids in shaping the prevailing six planning priorities that is set out in advance. The existing chairperson of the Executive Committee normally acts as the figurehead of the Coca-Cola Company and normally mandated by the duty of chairing the board meetings. The Executive chairperson is also the Chief Executive Officer and considered as the prevailing senior decision maker. The other existing executives within the company are either normally by major regions or in vital business specialism such as the Chief Financial Officer.
The Coca-Cola Company is also organized into the prevailing regional structures that normally subdivided into the existing combination of the centralization and localization. The prevailing connection is utilized in the determination of the success of the company in the prevailing marketplaces. This is mainly aimed at getting viable connection with the prevailing local consumers. The Company normally functions in six geographical operating segments that are commonly known as the Strategic Business Units accompanied by the prevailing corporate segment, which is the head office.
Every segment that pertains to the local Strategic Business Units is further sub-divided into numerous divisions. For instance the prevailing European Union Strategic Business Units and the United Kingdom Strategic Business Units that is situated within the Northwest Europe division. The prevailing geographical structure of the Coca-Cola Company is utilized in the process of recognition of the existing markets that are normally geographically separated accompanied by the markets that possess diverse stages of advancement. This is also utilized in the determination of the prevailing tastes and lifestyles variation from one location to the other. As normally carry out the existing incomes and the consumptions patterns of the esteem consumers.
Within the prevailing local level of the Coca-Cola Company…