a) In the Westchester case, Westchester Distributing Inc is in a position of losing its license as a result of the company violating section 25600 of the California Alcoholic Beverage Control Act. This act prohibits a licensee from giving gifts to customers linked to sales.
The weak internal control system at Westchester permitted 2 employees to exploit the system. They bribed a customer, Mr Moon, with $200, so as to induce him to buy the slow-moving Rising Sun beer. The employees contributed the sum of $200 and got a refund from the company by submitting false luncheon receipts. With a low demand for the rising sun beer, they decided to give Mr Moon kickbacks so as to achieve their sales ...view middle of the document...
The accounting system for management and control was not effective. Staffs could falsify expenses and get refunds from the company.
Information was not properly documented and shared within the organization. If this had not been the case, the owners would have been aware of the company’s dealings with Mr Moon and the meeting Mr Joe had with this customer.
The monitoring of staffs and transactions at Westchester was not efficient. Transactions such as staff expenses were not monitored. Customer transactions were also not been monitored. Staffs were not been closely monitored by their supervisors. The company also did not properly protect its assets as staff members had an easy access to neon beer signs and the neon beer signs were not properly accounted for.
Westchester did not manage its risk properly. The company was liable if employees’ violated the industry acts of fair competition and not the employees’. The company would have thoroughly assessed this risk and set incentives in a way that prevented the employees from violating this act and thereby protecting the company’s license.
Staff expenses were not been checked and matched with receipts before refunds were made. This is evidenced by employees falsifying receipts and getting refunds for expenses which were not related to the company’s activities or allowed by the company.
The accounting control at Westchester was not thorough as broken bottles were not properly accounted for or monitored. Broken bottle refunds were requested without any receipts or documentation. This provided a leeway for fraud.
The overall internal control and internal audit department at Westchester seems inexistent. They did not investigate financial transactions and request for supporting documents so as to prevent fraud and error.
c) The company should fire Mr Carter Mario for his unethical behavior. He violated the company’s code of conduct by falsifying receipts and has been seen in the past leaving the warehouse with unsigned items. This does not seem to be an isolated situation. He might have been falsifying receipts and claiming expenses in the past, thereby making the company incur business unrelated cost. He should be asked to refund this money. A meeting should be held with Mr Carter in which he should be asked to resign or more preferably fired.
Mr George Pavlov should be suspended or fired from the company. He falsified his expenses and violated the industry Act by giving gifts to a customer. His expenses should be investigated and a refund should be requested for his bogus...