Case Stdudy

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(Csc 42-CASE STUDY!!!!)
Agenda:

I. Background
II. Overview of the Fraud
III. Results
IV. Case Questions
V. Conclusion

Parties Involved:
* Woodrow Wilson Robinson (Woody) And Albert Leroy Hunt (Al) * Friends, Jobs and Greed.
* Goodner Brothers
* Pricing Strategy, Operating Expenses, Security
* Bookkeepers and Internal Auditors
* Lack of Internal Controls
* Felix Garcia
* Sales Manager of Huntington Location
* External Auditors
* Lack of Focus on Internal Controls

Woody’s Dilemma

* Has a Gambling Issue
* Has Debts He Cannot Pay
* Discovers Lack of Internal Control
* Sells Stolen Inventory to Pay Off Debts

Secretly Selling

* Woody Immediately Begins Selling Tires
* Selling Tires on Cash Basis
* Conducts theft in various ways
* Selling tires to Al

Inventory Shortage Discovered

* Woody Hides Inventory Shortage
* Internal Audit Counts Inventory
* Felix Garcia Takes the Initial Blame
* Independent Auditor Investigates Shrinkage

Epilogue

* Goodner Brothers Inc. presses Charges
* Goodner Brothers Inc. Files Insurance Claim
* Insurance Company Sues Al
* Al Sues Woody

Question 1: List what you believe should have been the three to five key internal control objectives for Goodner’s Huntington sales office.

1. Reliability of Financial Reporting
2. Compliance with Laws and Regulations
3. Effectiveness and Efficiency of Operations

Question 2: List the key internal control weaknesses that were evident in the Huntington unit’s operations.

1. Little Security in Tire Warehouse
2. Scrimped on Costs Related to IC
3. Relied on Honesty and Integrity of Employees
4. Used off-shelf Accounting Software
5. Sales Representatives had unrestricted access to system 6. No Segregation/ No Proper Segregation of Duties
7. Did not fill out Correct Forms, Used “Scrap Papers”

Question 3: Develop one or...
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