Case 3.5 - Goodner Brothers, Inc.
1. I believe should have been the three to five key internal control objectives of Goodner’s Huntington sales office are to ensure adherence to management policies and directives in order to achieve efficiently and economically the organisation's objectives; to safeguard assets; to secure the relevance, reliability and integrity of information, so ensuring as far as possible the completeness and accuracy of records; and to ensure compliance with statutory requirements. 2. The key internal control weaknesses that were evident in the Huntington unit’s operations are “inadequate control over safeguarding of assets; inadequate segregation of duties; Inadequate design of IT general and application controls that prevent the information system from providing complete and accurate information consistent with financial reporting objectives and current needs; Employees or management who lack the qualifications and training to fulfill their assigned functions; Inadequate design of monitoring controls used to assess the design and operating effectiveness of the entity's internal control over time.” (AU325) 3. The policies or procedures to alleviate the control weaknesses are “pre-numbering of documents; authorization of transactions; independent checks to maintain asset accountability; timely and appropriate performance reviews; information processing controls; physical controls for safeguarding assets and segregation of duties.” (AU314) 4. Besides Woody Robinson, parties at least partially responsible for the inventory losses Goodner suffered were the executive officers of Goodner T.J. and Ross Goodner because they were head of the firm, and they lacked of philosophy and operating style. Instead of an extensive system of internal controls, they relied heavily on the honesty and integrity of the employees they hired. Also, the sales manager Felix Garcia was responsible for the inventory losses because he only cares about the...
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