Establishing an Internal Audit Department: The Case of the Schwan Food Company
Global Perspectives on Accounting Education Volume 5, 2008, 1-16
ESTABLISHING AN INTERNAL AUDIT DEPARTMENT: THE CASE OF THE SCHWAN FOOD COMPANY
Hugh Pforsich College of Business Administration California State University - Sacramento Sacramento, California USA Bonita K. Peterson Kramer College of Business Montana State University Bozeman, Montana USA G. Randolph Just* ABSTRACT An effective internal audit department adds value to its organization in numerous ways. It helps the organization to achieve its objectives, improves risk management, strengthens internal controls, and enhances overall corporate governance. This case describes the steps that The Schwan Food Company took to establish its internal audit department, including finding a highly qualified chief audit executive, defining the internal audit department’s mission, developing the audit charter, staffing the department, creating an overall audit strategy, and assessing the department’s effectiveness. The exhibits provided in this case are used with permission straight from the company’s files, and all the information in this case is factual. The case is appropriate for an auditing class or an internal audit class at the senior or graduate level.
*
G. Randolph Just, CMA, CPA, CIA, CFE, CISA, CFSA, CCSA, was vice president, Audit Services, at Allina Hospitals & Clinics in Minnetonka, Minnesota, USA when he died in January 2006. He was previously chief audit executive for The Schwan Food Company.
1
2
Pforsich, Kramer, and Just
BACKGROUND he Schwan Food Company began in 1952 with one man and one truck. Marvin Schwan, the founder, was the son of German immigrants who came to the United States in 1920. He and his parents ran a creamery in Marshall, Minnesota, but were having trouble making ends meet. Marvin discovered that because of government pricing structures, he could sell ice cream for a few cents more in Yellow Medicine County, immediately north of Marshall. On March 18, 1952, he
ESTABLISHING AN INTERNAL AUDIT DEPARTMENT: THE CASE OF THE SCHWAN FOOD COMPANY
Hugh Pforsich College of Business Administration California State University - Sacramento Sacramento, California USA Bonita K. Peterson Kramer College of Business Montana State University Bozeman, Montana USA G. Randolph Just* ABSTRACT An effective internal audit department adds value to its organization in numerous ways. It helps the organization to achieve its objectives, improves risk management, strengthens internal controls, and enhances overall corporate governance. This case describes the steps that The Schwan Food Company took to establish its internal audit department, including finding a highly qualified chief audit executive, defining the internal audit department’s mission, developing the audit charter, staffing the department, creating an overall audit strategy, and assessing the department’s effectiveness. The exhibits provided in this case are used with permission straight from the company’s files, and all the information in this case is factual. The case is appropriate for an auditing class or an internal audit class at the senior or graduate level.
*
G. Randolph Just, CMA, CPA, CIA, CFE, CISA, CFSA, CCSA, was vice president, Audit Services, at Allina Hospitals & Clinics in Minnetonka, Minnesota, USA when he died in January 2006. He was previously chief audit executive for The Schwan Food Company.
1
2
Pforsich, Kramer, and Just
BACKGROUND he Schwan Food Company began in 1952 with one man and one truck. Marvin Schwan, the founder, was the son of German immigrants who came to the United States in 1920. He and his parents ran a creamery in Marshall, Minnesota, but were having trouble making ends meet. Marvin discovered that because of government pricing structures, he could sell ice cream for a few cents more in Yellow Medicine County, immediately north of Marshall. On March 18, 1952, he