Memo

To: Board of Directors, Sears Holdings Corporation

From: The CFO of Sears Holdings Corporation

Cc:

Date: 14th Dec, 2019.

Re: Potential Issues that External Audit Team Might Find and How to Handle Them

The audit report highlights that the fact that Sears Holdings Corporation has been

consistently making huge losses over a long period of time makes the records look suspicious

and is expected to attract the attention of an external auditor. The risk factors identified are

mainly associated with data accuracy, sincerity, the Principle of Prudence, the Principle of

Utmost Good Faith, and if the company used the correct estimates. These include: Uncertainty

on when to record income and expenses that may result in inaccurate records, Account

Receivable accuracy issues, possible cases of manipulation of data such as the losses made on

sale of assets and investments, and potential errors or omissions when entering sales and cash

records.

To help mitigate the risks identified in the audit report, I recommend that the company

should: Be recording expenses immediately they occur and only recording income when the

actual cash is received to avoid issues with uncertainty on when to record income and expenses;

ensuring that all the transactions of Account Receivables were correctly reported, verifying all

the Sales, and ensuring that all the Cash is recorded. In addition to this, the company should

ensure that the records it has on the transactions with its stakeholders is accurately reflected in

the stakeholder records.

 The company should implement the strategy by having an accounting software that is

used to store all the financial records. The records should be backed by transaction receipts or

invoices to act as physical proof and should be verified by the senior accountant in each of our

branches. Once the records are entered, any alterations should only be possible by the

authorization of regional head accountant. The branch accountant should also ensure that all the

records of expenses are updated by the close of every business day and that expected income are

noted and recorded immediately the actual cash is received. Every branch sales manager should

verify all the sales while checking stocks and work with the branch accountant to ensure that all

the cash is recorded. In addition, the company should ensure that it issues or receives receipts for

every transactions it engages in with its stakeholders and that it keeps copies of the same. It

should also urge its stakeholders to keep accurate records of all the transactions they engage in to

ensure that they have accurate data for verification if requested by external auditors.