No Shoes, No Service
 

The CEO of a large footwear retailer asks his chief auditor to assist with a mission-critical system implementation.

 

Shoes Inc. provides retail and wholesale distribution of men’s and women’s footwear in North America, Asia, and Europe, offering casual, dress, and fashion shoes under famous brand names. The company sells its products to shoe specialty stores and department stores, as well as clothing retailers. It also owns 48 retail stores in the United States and maintains an online shop. Price, quality, service, and brand recognition are all important competitive factors in the shoe industry, and Shoes has been recognized as a leader in all of them.

The footwear market is extremely competitive. Shoes competes with manufacturers, distributors, and retailers of men’s footwear, some of which are larger and have substantially greater resources than itself. The company’s ability to maintain its competitive edge depends on its success in delivering new products at the best value for the consumer, maintaining positive brand recognition, and obtaining sufficient retail floor space and effective product presentation. If it does not remain competitive, Shoes’ future operational results and financial condition could decline.

Recently the company has experienced diminished sales, and its high-demand items have been unavailable in stores. The CEO was surprised when friends asked him why they couldn’t find Shoes’ newest line of footwear in any of the stores they shopped. Disturbed by this information, the CEO immediately launched an internal investigation. The results confirmed that the firm was having a problem maintaining popular shoes in stock.

Company experts determined that a new enterprise resource planning (ERP) system was needed to remedy the problem. The CEO instructed his chief information officer to hire a consultant and a large ERP vendor — their combined services would encompass not only the sales process, but production and distribution processes as well.

Joe, the chief audit executive, was informed of the project after it started. The CEO told him, “Make sure this project doesn’t fail — our company’s survival depends on its success.” He also instructed Joe to ensure adequate monitoring is put in place to identify any emerging problems and stressed that he expected to see a significant increase in sales.

 What steps should Joe take now that he’s been assigned to this project? At what points in the process should he update the CEO, and what kind of information should he provide?
 

How would you handle this scenario? Share your comments below.


No Shoes, No Service
Interesting, especially reading others comments. I'm new to IIA coming from IT, having been a CISA for a number of years. I would first audit the finding that say there is a problem. If they have been successful in the past why is there a problem now? Is it expansion in the sales market(not clear) or some other reason like the head of Stocks & Inventory having just left for retirement? His knowledge would have been invaluable. I also don't like the phrase Company Experts. Is this IT driving the solution rather than business? It's not clear and I would investigate their findings. I believe Joe is being put in an impossible position, he's being asked to "Project Manage" when his job should be to ensure the project is managed by those who should do project management. One thing Joe must do is also distance himself from the actual deliverable..."a significant increase in sales". This is way outside of his remit and it should be made clear that only the business stakeholders are resonsible for this kind of delivery. regards
Posted By: Sean McPoland
2011-04-16 8:23 AM
No Shoes No Service
As CAE, Joe needs to review whether the system development project will address the problems they've had with stocking, and that implementation is conducted with proper controls to ensure that controls over inventory are maintained throughout. He needs to review the documentation associated with the project, such as a project charter, to determine whether the objectives of the project match up with the CEO's expectations for solving their problems. Joe also needs to review the means for addressing the concerns through the project, and determine if their plan of action for configuring the system will address those issues. Joe also has to review the other controls over system implementation such as testing of the system prior to installation, completeness of testing plans to ensure key components and controls within the system are addressed, the plan for addressing all criticsl discrepancies found in testing and ensuring they are documentated and corrected prior to go-live, and that there is adequate support during go-live to address additional issues (among others - system development audits are too involved to include everything in this comment). If the project does not address the CEO's concerns, Joe needs to communicate that to the CEO and see what the CEO wants to do with the project. If the project is addressing the CEO's concerns, Joe should conduct the review of controls over system development and alert the system development team and the CEO of weaknesses noted.
Posted By: Jann Kostecke
2010-10-08 11:04 AM
No Shoes, No Service
Hi Very interseting. Shoe business basically fahion oriented and always there is the risk of pile up stock due to change in fashion/Season. Yes the ERP will definetly support. Secondly Joe should map the style wise shoe movement across the country and sugest shifting of not so fast maodels to lesser towns with discounted rate to liquidate stocks. Auto triger for stock replishemnt may be thought of with an eye on changing season/fashion. As the Floor space and other factors are not an issue the shoe shop may be used to display other allied items like sports wear/equipments to increase the Foot fall in to the shops. Hope this supports Joe the auditor
Posted By: NATARAJAN SITARAMAN
2010-10-04 3:06 AM


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