Goodner Brothers Inc

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To: Mr. T.J & Mr. Ross Goodner & Board of members

From: Internal Auditor of Goodner Brothers Inc

Internal Auditor’s Report on Goodner Brothers Inc

1.0 Internal Control is a system of checking balances and it is designed to provide a reasonable assurance that assets are protected. Then, accounting data must be accurate according to the information of accounting. Operations should be efficient and also law and policies are compiled with. For this company (Goodners Brothers), We noted that weaknesses in internal control of this company make employee of this company, Woody Robinson was in serious financial trouble. So, the employee took advantage of his company’s weak internal controls by stealing a large of inventory, which employee then sold to other parties. We identify that the act of Woody Robinson was a form of major fraud. However, We have stated below that the main key internal control objectives for Goodner’s Huntington sales office. We also stated that the key internal control weaknesses and its implication that were evident in Huntington unit’s operations and control policies or procedures to alleviate the key internal control weaknesses. On the other hand, We also stated that other parties besides Woody Robinson who partially responsible for inventory losses in the company together with few fraud risk management strategy that could be implemented by this company.

2.0From this case, we have found that Sales Representative(Woody Robinson) in Goodner’s Huntington sales office took as an advantage of Goodner Brothers Inc weak in internal controls by stealing a large amount of inventory. So, We believe that this are the following key internal control objectives should be maintain in Goodner’s Huntington sales office. Firstly, Sales office’s staff need to ensure that the every transaction should have a proper authorization to prevent this kind of fraudulent use of resources. For example, Sales office’s staff should get the approval from the management or manager for very transactions. By apply this first objective, the shortages of inventory can be minimized and makes all the transactions going very smoothly. Secondly, Physical safeguards and security should have been the key internal control objectives. For example, sales office’s staff need to ensure that access to physical assets and information systems need to be controlled and properly restricted to authorized personnel. On the other hand, validity also should have been the key internal control objective. So, sales office’s staff need to ensure that all recorded transactions fairly need to be represent the economics events that actually occurred and also should be executed in accordance with management’s general authorization. Next, Error in handling also should have been the key internal control objective. So, sales office’s staff need to ensure that whatever errors detected at any stage of processing receive prompt corrective action and also should reported to the appropriate level of management. Next, Completeness also should have been the key internal control objective. So, sales office’s staff need to ensure that no valid transactions should have been omitted from the inventory records. This five objectives that we stated overall can minimum the bad debts. Furthermore, good control can minimized or maintain of the inventory records.

2.1On the other hand, we have identify the key internal control weaknesses and that were evident in the Huntington unit’s operations. Firstly, there is lack of sufficient workers in the company to perform the much needed various task because we identify that the company have 14 sales outlets with skeletal crews of 10 to 12 employees. Then, a sales manager supervised the other employees at each outlet and also working a sales district. The remaining staff typically included two sales representative. Furthermore, a receptionist who having double job as a secretary and also as a bookkeeper and seven employees who...
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