1. Key internal control aims of Goodner’s Huntington Gross saless Office: a. Controls should be able to forestall and observe fraud. Mandate should be required for every gross revenues dealing. Woody would non be able to sell returned tyres from clients and consignees for his ain benefits if all gross revenues minutess needed prior management’s blessing. B. Controls should take at safeguarding physical assets. Gross saless Office should guarantee that merely certain authorised forces could acquire entree to the warehouse and at any clip security should be enforced to minimise stock list deficits and shrinkings c. Controls should guarantee the completeness and truth of accounting records. Woody would bear down ware that he sold for his benefit to the histories of big volume clients. Or in other words. Woody has altered the nature of the minutess by blow uping the figure of tyres the clients really ordered.
2. Key internal control failings that were apparent in the Huntington unit’s operations a. Strong trust on the honestness and unity of the employees they hired. The company recruited its forces establishing off mentions and recommendations ; nevertheless this pattern could non do up for the deficiency of a strong internal control system. B. Insufficient forces. Its crew of 10 to 12 people had to staff its 14 gross revenues mercantile establishments. Many of Goodner’s forces had to take on dual places such as Goodner’s secretary who worked as both the receptionist and the bookkeeper. c. Unrestricted entree to the accounting system by the unit’s gross revenues director and two gross revenues representatives.
This gave Woody a good chance to perpetrate fraud. d. Lack of security for its tyre stock list. which typically ranged from $ 300. 000 to $ 700. 000 per each gross revenues mercantile establishment. 3. Control policies or processs to relieve the control weaknesses identified in inquiry 2: a. Mandate of minutess: Management blessing should be required on all minutess. Otherwise. the tyre purchase petition should be made by one person and got approved by a different 1. b. Segregation of responsibilities: The secretary should non move as both the secretary and the receptionist. Report on returned points should be generated by one person and so another person should have and set the returned points back to stock.