The Goodner Brothers Case
1. List what you believe should have been the three to five key internal control objectives of Goodner’s Huntington sales office.
The Goodner’s Huntington sales office should have implemented the following internal control objectives:
1. The reliability of financial reporting, which relates to the timely and accurate recording of transaction, and it makes sure that financial reports are reliable and free of material misstatement. In addition, it also deals with the physical security of assets; which means the assets are only used for business purposes and are safeguarded from unauthorized use.
2. Timely feedback on the achievement of operational or strategic goals, which deals with the achievement of the business strategy and implementing business tactics that make sure that the business strategy has been accomplished, which in turn, reveals whether the operations of the company are effective and efficient.
3. Compliance with laws and regulations, which make sure that all the employees comply with all applicable laws and regulations, which in turn, reveals whether the company is in compliance with the laws and regulations.
2. List the key internal control weaknesses that were evident in the Huntington unit’s operations.
Internal control weaknesses that were evident in the Huntington unit’s operations were the following.
I. The company relied heavily on the honesty and integrity of employees they hired instead of implementing an extensive system of internal controls. This had contributed to not having an appropriate internal system to check on prospective employees and periodic employee performance evaluations; which in, turn it would had revealed that Woody had significant debt outstanding and the manager would had followed on the customer’s complaints.
II. Since Woody had direct access to the inventory storage areas and had clearance to often load and deliver customer orders himself, the company did not have
The Goodner’s Huntington sales office should have implemented the following internal control objectives:
1. The reliability of financial reporting, which relates to the timely and accurate recording of transaction, and it makes sure that financial reports are reliable and free of material misstatement. In addition, it also deals with the physical security of assets; which means the assets are only used for business purposes and are safeguarded from unauthorized use.
2. Timely feedback on the achievement of operational or strategic goals, which deals with the achievement of the business strategy and implementing business tactics that make sure that the business strategy has been accomplished, which in turn, reveals whether the operations of the company are effective and efficient.
3. Compliance with laws and regulations, which make sure that all the employees comply with all applicable laws and regulations, which in turn, reveals whether the company is in compliance with the laws and regulations.
2. List the key internal control weaknesses that were evident in the Huntington unit’s operations.
Internal control weaknesses that were evident in the Huntington unit’s operations were the following.
I. The company relied heavily on the honesty and integrity of employees they hired instead of implementing an extensive system of internal controls. This had contributed to not having an appropriate internal system to check on prospective employees and periodic employee performance evaluations; which in, turn it would had revealed that Woody had significant debt outstanding and the manager would had followed on the customer’s complaints.
II. Since Woody had direct access to the inventory storage areas and had clearance to often load and deliver customer orders himself, the company did not have