No Segregation of Duties

No Segregation of duties

Segregation of duties is an important internal control because it ensures that more than one employee to handle certain job. Segregation of duty fails are usually because of bad internal control design. The actual problem is weak in control environment divide jobs to the employees depends on their own ability and conflict of duties always happen due to lack of monitoring. In Goodner Brothers Inc's case, there was no segregation of duties in Goodner's Huntington sales office which is one of the critical factors to effective internal control. The sales representatives including Woody and two other employees were involved in many areas of the company which was beyond the scope of their work. The responsibilities of bookkeeper were shared by the sales representatives as well. Due to the large volume of sales and purchase transactions, Woody and the sales representatives often entered the transactions directly to the accounting system. The company did not hire a storage manager to manage the inventory storage facilities but allows the sales representatives to have full access to the inventory storage facilities. Being the sales person who deals sales with customers should be restricted to deliver those same sales. This may cause confusion to employees that which job should to process initially and might have weak performance for the entire jobs.

Lack of security of its inventory

The company also had too little physical control of its inventory. Access was available to employees who did not need it. Since Woody had direct access to the inventory storage areas and had clearance to often load and deliver customer orders himself, the company did not apply any internal control policy to provide physical security for all inventories. Not only happened in Goodner Brother's case, but lack of physical control of inventory will also cause collusion