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Goodner Brothers

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Submitted By reyesj89
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Case 3.5 Goodner Brothers, Inc.

To better understand the nature at which fraud can occur in a business, specifically due to weak internal controls, and to examine the characteristics of a fraudster.

IMPORTANT HIGHLIGHTS: * Goodner Brothers, Inc.’s sloppy accounting practices and lax control over its inventory opened doors for theft and other types of fraud to occur internally * The lack of attention and importance that Goodner Brothers, Inc. put into their internal control system in order to cut corners * The importance of proper and professional auditing procedures in detecting fraudulent activity in a company

PROBLEMS FACED IN COMPLETING THE CASE: * Goodner Brothers, Inc. focused much attention on margins and profits, they scrimped on their security and operating expenses which in turn increased their internal control risk * The ease with which an employee, familiar with the company’s internal controls and procedures, could embezzle money

LESSONS LEARNED: * A person’s external pressures can be so intense that these pressures can influence even a good, hardworking employee to commit fraud towards their own company. * It is worth the extra detail, time, and expenditures spent towards a company’s internal control measures because even the most ‘loyal’ and long-time employees may steal.

1. Internal control objectives: * Stronger padlocks and security systems should have been enforced in the sales outlets of Goodner’s Huntington office, which would have prevented unauthorized individuals to steal inventory. * The authorization of transactions and new customers required an approval of the sales manager to credit the sale. * The annual review by the internal audit should be used to compare the performance and internal controls of the company to prevent fraud or problems with the company.…...

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