Goodner Brothers Audit Case
DATE: March 6, 2013
SUBJECT: Goodner Brothers, Inc.
The Goodner Brothers, Inc. audit case is based off the story of two men who have been friends since their childhood: Woody Robinson and Al Hunt. Now as adults, Mr. Hunt works for an auto supply store while Mr. Robinson works for Goodner Brothers, Inc., a tire wholesaler in Huntington, West Virginia. In the Goodner case, internal auditors were conducting their annual inventory counts of Goodner Brothers, Inc. and determined that their numbers were lower than the book inventory numbers by $143,000. As it would with any company, the misstatement of inventory raised red flags forcing the company to contact their independent audit firm to investigate the inventory shortage. The investigation concluded that the company did not have adequate internal controls and that many issues involving Mr. Robinson existed. Below I have detailed my overall opinion, the issues surrounding the company, and future internal control procedures that might help limit inventory theft and access to accounting records.
At the conclusion of the investigation, the company ultimately filed a lawsuit against Mr. Robinson, thus meaning he was terminated from the company prior to the lawsuit. I agree with this action because it was the only solution to setting a new tone at the top. If the company is to implement new internal control procedures, they needed to send the message to other employees that theft will get you fired.
I believe that the company should have implemented the following internal control objectives into their daily operations in order to safeguard assets and accounting records. First, the company should segregate the duties of authorization, implementation, and recording between three or more individuals to reduce the risk of fraud. As stated in the case, “besides the Huntington facility’s bookkeeper, the unit’s sales manager, and two sales representatives had unrestricted access to the accounting system.” Segregating
SUBJECT: Goodner Brothers, Inc.
The Goodner Brothers, Inc. audit case is based off the story of two men who have been friends since their childhood: Woody Robinson and Al Hunt. Now as adults, Mr. Hunt works for an auto supply store while Mr. Robinson works for Goodner Brothers, Inc., a tire wholesaler in Huntington, West Virginia. In the Goodner case, internal auditors were conducting their annual inventory counts of Goodner Brothers, Inc. and determined that their numbers were lower than the book inventory numbers by $143,000. As it would with any company, the misstatement of inventory raised red flags forcing the company to contact their independent audit firm to investigate the inventory shortage. The investigation concluded that the company did not have adequate internal controls and that many issues involving Mr. Robinson existed. Below I have detailed my overall opinion, the issues surrounding the company, and future internal control procedures that might help limit inventory theft and access to accounting records.
At the conclusion of the investigation, the company ultimately filed a lawsuit against Mr. Robinson, thus meaning he was terminated from the company prior to the lawsuit. I agree with this action because it was the only solution to setting a new tone at the top. If the company is to implement new internal control procedures, they needed to send the message to other employees that theft will get you fired.
I believe that the company should have implemented the following internal control objectives into their daily operations in order to safeguard assets and accounting records. First, the company should segregate the duties of authorization, implementation, and recording between three or more individuals to reduce the risk of fraud. As stated in the case, “besides the Huntington facility’s bookkeeper, the unit’s sales manager, and two sales representatives had unrestricted access to the accounting system.” Segregating