Goodner Brother Inc Essay Example for Free

Goodner Brother Inc Essay1. Key internal control objectives of Goodners Huntington Sales Office a. Controls should be able to prevent and detect fraud. self-assurance should be required for every gross revenue transaction. Woody would non be able to sell returned tires from customers and consignees for his own benefits if all sales proceeding needed prior warinesss approval. b. Controls should aim at safeguarding physical assets. Sales Office should ensure that only certain authorised effect could get access to the warehouse and at any time security should be oblige to minimize inventory shortages and shrinkages c. Controls should ensure the completeness and accuracy of accounting records. Woody would charge merchandise that he change for his benefit to the accounts of large volume customers. Or in other words, Woody has altered the nature of the transactions by inflating the number of tires the customers actually ordered.2. Key internal control weaknesses that were eviden t in the Huntington units operations a. Strong reliance on the honesty and integrity of the employees they hired. The company recruited its personnel basing off references and recommendations that this practice could not make up for the lack of a strong internal control system. b. inferior personnel. Its crew of 10 to 12 people had to staff its 14 sales outlets. Many of Goodners personnel had to take on double positions such as Goodners secretary who worked as both the receptionist and the bookkeeper. c. open-ended access to the accounting system by the units sales manager and two sales representatives.This gave Woody a good opportunity to commit fraud. d. Lack of security for its tire inventory, which typically ranged from $300,000 to $700,000 per all(prenominal) sales outlet. 3. Control policies or procedures to alleviate the control weaknesses identified in question 2 a. Authorization of transactions Management approval should be required on all transactions. Otherwise, the t ire purchase necessitate should be made by one individual and got approved by a different one. b. sequestration of duties The secretary should not act as both the secretary and the receptionist. Report on returned items should be generated by one individual and then another individual should receive and put the returned items back to stock.