1. Financial Reporting Objective- This makes sure that the financial report is reliable and free of fraudulent reporting and also deals with the safeguarding of assets from unauthorized use.
2. Operations Objective- This covers business strategy and tactics and the effectiveness and efficiency of operations.
3. Compliance Objective- This makes sure that the company is in compliance with all applicable laws and regulations.
2.) All three of the objectives in some way were not followed by the Huntington office nor did management try to enact the five components related to the objectives. The biggest internal control weakness was that they relied on the honesty of employees; therefore they didn’t implement many control procedures that could have significantly reduced Woody’s ability to steal from the company. There was no segregation of duties in the Huntington office which is critical to effective internal control. The sales representative (Woody, along with two other employees, was able to do any of the four types of functional responsibilities. The tire plant also had no physical control of its inventory; access was available to employees who did not need it. Furthermore, there were no access controls on the computer systems to lock out sales reps from entering accounting entries. This problem existed from the company’s use of an accounting system that was meant for small businesses, not businesses that had sales of nearly $40 million a year.
3.) The first step that should be taken is that management should set the objectives and follow the five components related to the objectives. If this had been done in the first place Woody’s incident likely would have never taken place. However, to mention ideas to help alleviate the weakness I identified, I think the first priority of the company should be to install accounting software that is able...