Goodner and Howard Street Jewelers Case

Topics: Internal control, Auditing, Sales Pages: 3 (677 words) Published: November 11, 2014
Case: Goodner and Howard Street Jewelers Cases
Student Name: Shucong Li
Date: 09.16.2014
I. Three conditions of Fraud Triangle:
1. Incentive or pressure to perpetrate fraud:
a) Excessive pressure for management to meet third party expectations b) Financial stability or profitability is threatened
c) Management’s personal financial situation is threatened 2. Opportunity to carry out the fraud
a) Nature of the Industry or entity’s operations
b) Complex or unstable organizational structure
c) Ineffective monitoring of management
d) Deficient internal control
3. Attitude or rationalization to justify fraud
a) Nonfinancial management’s excessive participation in selection of accounting principles and estimates b) Excessive interest by management in stock prices and earning trends c) Committing to aggressive or unrealistic forecasts

d) Ineffective communication of ethical standards or selection of inappropriate ethical standards e) Recurring attempts to justify marginal or inappropriate accounting based on materiality f) History of violations of securities laws or allegations of fraud Fraud Triangle in Goodner’s case:

Pressure: It was an experience by individual that they feel they can’t share with friends and family-- the pressure from Woody’s worsening gambling problem. Opportunity: There was a chance to solve unshared problem by violating trust. As a businessman, Woody was able to manipulate his own paperwork or others paperwork. And, their incredibly poor internal controls were also an opportunity. Rationalization: Woody sees this as his only way out of his gambling problem. II. Control environment: also called "Internal control environment", is a term of financial audit, internal audit and Enterprise Risk Management. It means the overall attitude, awareness and actions of directors and management regarding the internal control system and its importance to the entity. For Goodner Brothers’ case, in order to achieve their sale goals, they had a...
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