CASE STUDIES in CS 17

Mr. Eldimario O. Antiquina, CPA, MBA
Professor

Ms. Crismarjoe Dara L. Vasay Student

1. Breezy Company

EXECUTIVE SUMMARY The sales manager of Breezy Company, John Breezy moved to Alaska so Chuck Breezy, President of Breezy Company hired a young college graduate to fill the position. Trying to keep sales level up, Chuck established a reward incentive based on net sales. Bob Sellmore as the new sales manager was eager to set his career in motion and decided he would attempt to increase the sales levels. He recruited new customers while keeping the old clientele. For one year, Bob had proved himself to Chuck, who decided to introduce an advertising program to further increase sales which brought in orders from a number of new customers, many of whom Breezy had never done business with before. With the influx of orders from new customers, Chuck became excited that he instructed Jane Breezy, the finance manager to raise the initial credit limit for new customers that induce them to purchase more. As the finance manager, Jane performs credit checks. At first, Jane really sees to it that credits are approved on the basis of past behavior to those customers who she had been familiar. When there are new customers, she usually approved low credit at first but increases it after the customer exhibited reliability. But Chuck felt that this policy is restricting a further increase on sales that he decided to increase credit limits even to new customers. The company showed marked increase on sales for the years, but the percentage of uncollectible had also tripled. And this only shows that the company is not doing well and possibly couldn’t sustain the increase in losses in the future.

REQUIREMENTS Analyze the weaknesses in internal control and suggest improvements.

Weaknesses in internal control:
a. Hiring of a young