WALKER BOOKS INC. Prepared by: Barcelon, Roselle Chave, !el"ssa #race !anao"s, $onah !. Reyes, Anne Clar"sse
Case Bac%&ro'nd
Wal%er Boo%s, Inc., "s (he )as(es(*&ro+"n& boo% d"s(r"b'(or "n (he n"(ed S(a(es. Es(abl"shed "n -/- "n Palo Al(o, Cal")orn"a, Wal%er Boo%s +as or"&"nally a s"de pro0ec( o) )o'nder and c'rren( pres"den( C'r("s Wal%er, +ho a( (he ("1e +as e1ployed by a local la+ )"r1.
2e (hen dec"ded (o 'se so1e o) h"s sav"n&s (o b'y an abandoned res(a'ran( and conver( "( "n(o a ne"&hbo'rhood boo%s(ore, 1a"nly sell"n& 'sed boo%s (ha( +ere dona(ed and ob(a"ned )ro1 )lea 1ar%e(s.
When (he s(ore )"rs( opened, !r. Wal%er3s +")e, La'ren, +as (he only e1ployee d'r"n& (he +ee% and C'r("s +or%ed +ee%ends. A( (he end o) (he )"rs( )"scal year, Wal%er Boo%s had &rossed 456,666 "n sales. A)(er so1e ("1e, he (hen 7'"( h"s 0ob a( (he la+ )"r1 (o )'lly concen(ra(e on opera("n& (he boo%s(ore.
!ore e1ployees +ere h"red, 1ore boo%s +ere (raded "n, and 1ore sales +ere a((a"ned each year (ha( passed.
In -8, Wal%er3s sales s(ar(ed (o decl"ne beca'se o) "ncreased co1pe("("on +h"ch are lar&e 'pscale boo%s(ores be"n& b'"l( "n (he area and beca'se o) (he 'se o) (he In(erne( )or )"nd"n& and order"n& boo%s +h"ch +as99as beco1"n& cheaper and 1ore pop'lar )or c'rren( c's(o1ers.
ec"d"n& (o (a%e a r"s% beca'se o) (he ne+)o'nd co1pe("("on, he closed h"s doors (o (he ne"&hborhood, "nves(ed 1ore 1oney (o e;pand (he c'rren( proper(y, and (rans)or1ed h"s co1pany )ro1 s"1ply sell"n& 'sed boo%s (o be"n& a d"s(r"b'(or o) ne+ boo%s.
2"s b's"ness 1odel +as (o ob(a"n boo%s )ro1 p'bl"shers a( a d"sco'n(, s(ore (he1 "n h"s +areho'se, and resell (he1 (o lar&e boo%s(ore cha"ns.
Wal%er Boo%s, Inc., has rap"dly beco1e one o) (he lar&es( boo% d"s(r"b'(ors "n (he co'n(ry.
Al(ho'&h (hey are s("ll a( (he"r or"&"nal loca("on "n Palo Al(o, Cal")orn"a, (hey d"s(r"b'(e boo%s (o all 86 s(a(es and beca'se o) (ha(, (he co1pany no+ sees &ross sales o) abo'( 4-68,666,666 per year
S(a(e1en( o) (he Proble1
Al(erna("ve Co'rses o) Ac("on (o address (he proble1: a.) SUPERVISION
Wal%er co1pany 1's( have an a'(hor"e person, %no+n as (he chec%er (o ass"s( (he chec%"n& and (he )lo+ o) "nven(or"es "n (he +areho'se.
S"nce (he co1pany enco'n(ers del"very delays, (hey 1's( have a carr"er depar(1en( so (ha( "nven(or"es +"ll be ('rned over (o c's(o1ers or (o o(her branches as )as( as poss"ble (o preven( "nven(ory s(oc% o'(s.
b.) SEGREGATION OF DUTIES
Wal%er Co1pany 1's( have (as%s d"spersed (o d"))eren( depar(1en(s.
In order (o 1a;"1"e ("1e and 1a;"1"e (he order sales, Wal%er Co1pany 1's( be able (o see (ha( d"))eren( depar(1en(s are ass"&ned +"(h (he"r spec")"c (as%s.
c.) ACCESS CONTROL
Wal%er Co1pany=s co1p'(er depar(1en( 1's( see (o "( (he "1por(ance o) prov"d"n& 1ore co1p'(er 'n"(s.
S"nce (he co1pany rel"es only (o a s(and alone +or% s(a("on and "( has no phys"cal so'rce doc'1en(s )or bac%*'p, (he des(r'c("on o) )"les can leave Wal%er Co1pany +"(h "nade7'a(e "nven(ory record.
d.) INVENTORY RECORDS
Wal%er Co1pany=s sales depar(1en( 1's( al+ays 1a"n(a"n )"le bac%*'ps (o preven( loss o) sales records s"nce (hey only have a s(and alone PC +or% s(a("on.
Wal%er co1pany 1's( be able (o p'rchase 1ore co1p'(ers )or )as( and 1ore rel"able doc'1en(s )or (he"r sale "np'(s (o preven( 1an'al proced'res s"nce 1an'al proced'res 1ay res'l( (o co11'n"ca("on lo&s (o e1ployees or lo&s on (rans1"(("n& order (o p'rchas"n& depar(1en(.
Reco11enda("on
co1pany +o'ld bene)"( &rea(ly by "1prov"n& on cer(a"n aspec(s o) "(s "n(ernal con(rol.
proble1 needs (o be addressed by ens'r"n& (ha( so'rce doc'1en(s are d"rec(ed (o (he proper depar(1en(s so (ha( all (ransac("ons are acco'n(ed )or and ver")"ed.
Se&re&a("n&
AP and d"sb'rse1en( d'("es and s(ren&(hen"n& "ndependen( ver")"ca("on +"ll also help "n (he reconc"l"a("on o) acco'n("n& records.
I1prove1en(s
"n a'(hor""n& p'rchas"n& (ransac("ons and s'perv"s"n& (he rece"p( o) &oods are so'&h( (o re&'la(e (he "n)lo+ o) "nven(ory (o (he co1pany.
Reco11enda("on Accounting documntation and !co!d" Condition:
?o'cher and s'ppor("n& doc'1en(s are no( &"ven (o (he Cash "sb'rse1en( depar(1en( )or chec% approval@ no o))"c"al l"s( o) 7'al")"ed vendorss'ppl"ers "s 1a"n(a"ned
Risk:
Pay1en( )or 'na'(hor"ed p'rchases 1"&h( occ'r
Recommendation:
Prov"de s'))"c"en( s'ppor("n& doc'1en(s (o ev"dence (ha( (he d"sb'rse1en( (o be 1ade "s le&"("1a(e (o a %no+n and e;"s("n& s'ppl"er
Reco11enda("on Sg!gation o# duti" Condition:
Acco'n(s Payable cler% prepares chec%s )or d"sb'rse1en(s
Risk:
AP cler% 1ay 1"sappropr"a(e co1pany )'nds and d"s&'"se (he )ra'd by ad0's("n& (he AP boo%s
Recommendation:
Separa(e (he )'nc("ons o) (he Acco'n(s Payable )ro1 Cash "sb'rse1en(s
Reco11enda("on Ind$ndnt %!i#ication Condition:
Rece"v"n& depar(1en( does no( send a copy o) (he rece"v"n& repor( (o (he Acco'n(s Payable depar(1en(
Risk:
Recorded obl"&a("ons (o s'ppl"ers 1"&h( no( have a le&"("1a(e bas"s e.&. no phys"cal rece"p( o) &oods
Recommendation:
2ave (he rece"v"n& depar(1en( )or+ard a copy o) (he rece"v"n& repor( (o (he AP depar(1en( )or reconc"l"a("on p'rposes.
Reco11enda("on Su$!%i"ion Condition:
#oods (ha( arr"ve are no( 1an'ally "nspec(ed and reconc"led +"(h (he bl"nd copy o) (he PO
Risk:
A1o'n( and cond"("on o) &oods rece"ved 1ay no( be (he sa1e as (ha( +h"ch +as ordered
Recommendation:
Separa(e (he )'nc("ons o) (he Acco'n(s Payable )ro1 Cash "sb'rse1en(s
Reco11enda("on Accounting documntation and !co!d" Condition:
Invo"ces rece"ved are d"scarded a)(er +r"("n& (he chec%
?o'cher and s'ppor("n& doc'1en(s are no( &"ven (o (he Cash "sb'rse1en( depar(1en( )or chec% approval@ no o))"c"al l"s( o) 7'al")"ed vendorss'ppl"ers "s 1a"n(a"ned
Risk:
Lac% o) a'd"( (ra"l
Pay1en( )or 'na'(hor"ed p'rchases 1"&h( occ'r
Recommendation:
!a"n(a"n a )"le o) rece"ved "nvo"ces )or record*%eep"n& p'rposes
Prov"de s'))"c"en( s'ppor("n& doc'1en(s (o ev"dence (ha( (he d"sb'rse1en( (o be 1ade "s le&"("1a(e (o a %no+n and e;"s("n& s'ppl"er
Reco11enda("on T!an"action aut&o!i'ation Condition:
P'rchas"n& a&en( has co1ple(e a'(ono1y over (he p'rchas"n& dec"s"ons o) (he co1pany
Risk:
!ay res'l( "n e;cess"ve "nven(ory levels
Recommendation:
I1ple1en( a sys(e1 o) p'rchase order a'(hor"a("on
