Lack of segregation of duties: This is evident in the way sales representatives had autonomous access to inventory, accounting system, and customer orders. The receptionist also doubled as the bookkeeper and secretary.
Weak control environment: Goodner relied on the integrity and honesty of the employees that had been recruited. As a result, there were minimal efforts in instituting strong and reliable internal controls.
Weak accounting information system: The accounting system in use was not up to date. It was a standardized system and was not developed to specifically suit the needs of the company.
Insufficient monitoring: The management neglected complaints coming from customers regarding the billing charges and other issues.
Lack of a warehouse security system: This made it possible for the sale representatives to steal inventory for their own gains.
To mitigate the issue of segregation of duties, the company should first work in employing sufficient staff members to carry on the relevant duties in the organization. This will ensure that there is no need of allocating one employee more than one duty. The aspect will make it difficult for them to perpetrate fraudulent activities and have the ability to conceal their deeds.
Goodner should also strengthen the internal controls and not rely on the integrity and honesty of the employees. If the internal controls are strong, there would be an enhancement of periodic employee evaluations to ascertain those employees with huge debts that are likely to drive them in unwanted practices.
Goodner should use an accounting information system that suits the company’s operations. It becomes easier for the management to monitor processes this way. Complaints coming from customers should be addressed too since it is usually an indication that something is not operating as expected in some area.
To enhance warehouse security, the company should institute physical controls. This includes installation of locks and cameras in order to have control of inventory.
Felix Garcia: Being the sales manager, he should have followed up on the complaints that were being raised by the customers. If he paid the necessary attention to Woody’s sales, he would have identified the discrepancies that existed.
Al Hunt: Being the owner of Curcio’s tires, Al should not have accepted the sketchy tires.
Internal Auditor: Should have recognized that the internal controls were weak and not relied on the management’s word.
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