Case 3.5 – 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