Case 3.5 Goodner
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February 17, 2011
Rory Knight
Acctg 723 - Advance Auditing
Prof. Arthur Dignam
Cases 3.5 Goodner Brothers, Inc.
Goodners Huntington sale office had no real internal control objectives. As stated in the case the controls were almost nonexistent and management was lax as it relates to controls. The objectives should have been in place by the company;
1. Reliable financial reporting – the objective here is ensure that financial records, mainly accounts payable and accounts receivable, are correct and reliable ensuring that money is not being embezzled or posted to incorrect accounts.
2. Effective & Efficient operation – the objective here is to have a minimum standard of operation that would provide a greater result in the end. Having more frequent performance reviews would aid in having a more efficient operation.
3. Compliance – it should have been the objective of the company to see to it that all employees follow the rules of the company’s internal controls and laws in general. Woody selling defective tires would be considered unlawful and could have cost the company in a law suit.
4. Safe guarding of Assets – the objective here would be to minimize access to the company’s assets and to maintain an accurate count of all tires.
Goodners Huntington unit had quite a number of weaknesses and seemingly had no measure in place for internal control. Such weaknesses are;
Control Environment – The tone from the management created a major weakness. There was no sense of control in place since management in an effort to cut expense did not invest in proper control systems. Garcia admitted that his job is to sell tires and sell them as quickly as possible. So, the sales manager himself had no interest in the controls of inventory. The sense of the environment is that everything was based on trust.
Separation of duties – Woody was simply too involved in many areas of the company. As the person making the sales with customers he...
Rory Knight
Acctg 723 - Advance Auditing
Prof. Arthur Dignam
Cases 3.5 Goodner Brothers, Inc.
Goodners Huntington sale office had no real internal control objectives. As stated in the case the controls were almost nonexistent and management was lax as it relates to controls. The objectives should have been in place by the company;
1. Reliable financial reporting – the objective here is ensure that financial records, mainly accounts payable and accounts receivable, are correct and reliable ensuring that money is not being embezzled or posted to incorrect accounts.
2. Effective & Efficient operation – the objective here is to have a minimum standard of operation that would provide a greater result in the end. Having more frequent performance reviews would aid in having a more efficient operation.
3. Compliance – it should have been the objective of the company to see to it that all employees follow the rules of the company’s internal controls and laws in general. Woody selling defective tires would be considered unlawful and could have cost the company in a law suit.
4. Safe guarding of Assets – the objective here would be to minimize access to the company’s assets and to maintain an accurate count of all tires.
Goodners Huntington unit had quite a number of weaknesses and seemingly had no measure in place for internal control. Such weaknesses are;
Control Environment – The tone from the management created a major weakness. There was no sense of control in place since management in an effort to cut expense did not invest in proper control systems. Garcia admitted that his job is to sell tires and sell them as quickly as possible. So, the sales manager himself had no interest in the controls of inventory. The sense of the environment is that everything was based on trust.
Separation of duties – Woody was simply too involved in many areas of the company. As the person making the sales with customers he...