Goodner Brother, Inc
1 List what you believe should have been the three to five key internal control objectives for Goodner’s Huntington sales office.
First of all, one of the key internal control objectives is to gain market share at Huntington area. Goodner achieved its ambitious sales goals by undercutting competitors’ prices, and its gross profit margin averaged 17.4 percent, considerably below the mean gross profit margin of 24.1 percent for comparable tire wholesalers. Therefore, to compensate for its low gross profit margin, Goodner has to focus on increasing its market share.

Secondly, the financial reporting objective for Goodner’s Huntington sales office would be producing reliable financial statements. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Therefore, financial statements should be understandable, relevant, reliable and comparable, and the reported assets, liabilities, equity, income and expenses are directly related to Goodner’s financial position.

Last but not the least, the internal control for Goodner’s Huntington sales office should also fulfill the responsibility to compliance with laws and regulations. There are laws and regulations on internal control related to financial reporting in a number of jurisdictions. In the U.S. these regulations are specifically established by Sections 404 and 302 of the Sarbanes-Oxley Act.

2 List the key internal control weaknesses that were evident in the Huntington unit’s operations.
Control Environment:
Goodner scrimped on expenditures on internal control measures, T.J. and Ross Goodner relied heavily on the honesty and integrity of the employees they hired, especially the sales manager of Huntington unit, Felix Garcia, who showed completely ignorance of internal control. All of these showed that the whole company is lack of focus on Control Environment. A company’s control environment represents management’s attitude, awareness, and actions about internal control. The control environment captures the importance of control in management’s operating style. A strong sense of integrity and ethical values is a part of a strong internal control.

Risk Assessment:
Secondly, every entity faces risks, both external and internal, and its management’s task is to identify the risks that could affect their operations, financial reporting, and compliance objectives. Goodner didn’t realize the incentives and pressures, or the opportunities for their employees to commit fraud. Woody’s gambling problem lead to his fraud inside the company, and the company’s sloppy accounting practices and lax control over its inventory and other assets

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Key Internal Control Objectives And Goodner Brother. (July 9, 2021). Retrieved from https://www.freeessays.education/key-internal-control-objectives-and-goodner-brother-essay/