Coodner Brothers, Inc.
1. List what you believe should have been the three to five key internal control objectives of Goodner’s Huntington sales office.
• Existence – Record the purchase orders in standard form as soon as sales reps receive them.
• Rights and obligations – Limit rights for sales reps.
• Completeness – Record the purchase order, ship the inventory, and receive payment.
• Valuation – Keep accuracy for the value.
2. List the key internal control weaknesses that were evident in the Huntington unit’s operations.
• Ineffective controls of physically counting
- Sales rep (Woody) involved in physically counting and took the count sheets for both team to the sales office, which mean offered him chances to manipulate the numbers
• Ineffective accounting procedures that do not tie recorded purchases to receiving data
- The sales reps often jotted the details of a transaction on a piece of scrap paper and entered information later either by themselves or others.
• Unrestricted access to the computerized accounting system
- Unit’s sales manager, two sales reps and bookkeeper had unrestricted access to the accounting system.
• Lack of separation of duties
- Sales reps had direct access to the inventory storage areas
- Sales reps can load and delivered customer orders themselves
- Sales reps had unrestricted access to the computerized accounting system
- Sales reps involved physical counting
- Receptionist doubled as a secretary
• Lack of physical safeguards
- No physical safeguards for inventory.
3. Develop one or more control policies or procedures to alleviate the control weaknesses you identified in responding to Question 2.
• Ineffective controls of physically counting
- Sales rep should not involve in physically counting. And the counting documents should be sent to the sales office directly by team leaders themselves.
• Ineffective accounting procedures that do not tie recorded purchases to receiving data
- Detail of purchase orders should be record
• Existence – Record the purchase orders in standard form as soon as sales reps receive them.
• Rights and obligations – Limit rights for sales reps.
• Completeness – Record the purchase order, ship the inventory, and receive payment.
• Valuation – Keep accuracy for the value.
2. List the key internal control weaknesses that were evident in the Huntington unit’s operations.
• Ineffective controls of physically counting
- Sales rep (Woody) involved in physically counting and took the count sheets for both team to the sales office, which mean offered him chances to manipulate the numbers
• Ineffective accounting procedures that do not tie recorded purchases to receiving data
- The sales reps often jotted the details of a transaction on a piece of scrap paper and entered information later either by themselves or others.
• Unrestricted access to the computerized accounting system
- Unit’s sales manager, two sales reps and bookkeeper had unrestricted access to the accounting system.
• Lack of separation of duties
- Sales reps had direct access to the inventory storage areas
- Sales reps can load and delivered customer orders themselves
- Sales reps had unrestricted access to the computerized accounting system
- Sales reps involved physical counting
- Receptionist doubled as a secretary
• Lack of physical safeguards
- No physical safeguards for inventory.
3. Develop one or more control policies or procedures to alleviate the control weaknesses you identified in responding to Question 2.
• Ineffective controls of physically counting
- Sales rep should not involve in physically counting. And the counting documents should be sent to the sales office directly by team leaders themselves.
• Ineffective accounting procedures that do not tie recorded purchases to receiving data
- Detail of purchase orders should be record