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(Audit Report Summary)
Comments and Concerns: (Condition, Cause & Effect)

Green Mountain Coffee Roasters, Inc. is

considered as a large scale organization because of its
multiple product lines, across the country transactions
and market share but it only employs 250 full-time and
part-time employees to oversee the operations.
Inadequate number of employees not only hurts its
ability to maximize opportunities, but can also create
problems that can lead to serious financial
consequences. It can create problems to customers
when they dont get timely answers to their questions,
receive poor customer service or have to wait longer
than normal for delivery of product. When this happens,
it might lose customers, lose references and the ability
to attract new customers and reduce revenues enough
to damage the business.
Criteria: (Established Procedures/Best Practices)

1. Large scale organization should have greater

than or equal to 250 employees, regardless of
2. A large-scale organization retains substantial
revenue in the millions of dollars. Revenue refers to
income that has been earned by an organization.
Large-scale organizations typically maintain a large
market share and therefore earn a large profit from
its customers.
3. These assets can include machinery, equipment,
materials, locations, property and stock. Large-Scale
Organizations require a substantial amount of assets
to maintain production and operations.
4. Large-scale organizations are typically based in
multiple locations, meaning they operate outside of
their main location. It can include separate branches,
divisions or plants of the same organization, which
could be located domestically or internationally. An
organization operating internationally means that
organization a transnational or multinational
corporation. Large-scale organizations also have a
complex management structure involving multiple
levels to manage all operations and employees. This
involves multiple levels of management with different
responsibilities, authority and power.
Recommendations: (Proposed Solution)

Green Mountain Coffee Roasters, Inc. should hire more

employees adequate for their operational needs. Additional
costs will be incurred for additional manpower but in return, it
results productivity that will increase profitability. When the level
of manpower is adequate, the business has more options in
how it operates. It has some flexibility in terms of which
employees cover shifts. It is easier to get people to fill in. The
company also has a greater pool of workers with which to
construct strong teams and is more likely to have employees
with the skills, knowledge and abilities to tackle current
company problems. Additionally, the company has more
employees who can give their own ideas and perspectives. It
therefore may have an easier time remaining innovative and
Comments and Concerns: (Condition, Cause & Effect)

Green Mountain Coffee Roasters accounting system

consists of manual procedures supported by stand-alone PC
located in various departments. Computers are not
networked and they cannot share data digitally. All
interdepartmental communication is through hard copy
The company failed to adapt innovation through the use of
modern technology. Inadequate technology puts
businesses at a competitive disadvantage, lowers
employee motivation, and leads to inefficient work
practices. The company cannot increase their employees'
productivity because of outdated office equipment used in
their operations. Processing of purchase requisitions until
payments will require a long process. Interdepartmental
communication will take time and work efficiency will suffer.
They cannot easily connect with their suppliers across the
world and it will be hard for them to reach out new
economic markets.
Criteria: (Established Procedures/Best Practices)

Business technology helps

companies conduct business easily.
Large businesses use computers,
servers, websites and personal digital
products to develop competitive
advantages in the economic marketplace.
It also helps automate back office
functions, such as record keeping,
accounting and payroll. Another is
companies use technology to create
secure environments for maintaining
sensitive business or consumer
information. It can help improve their
communication processes.
Emails, texting, websites and personal digital products
applications, known as apps, can help companies improve
business communication. Using several types of
information technology communication methods allow
companies to saturate the economic market with their
message. Companies may also receive more consumer
feedback through these electronic communication
methods. These methods also allow companies to reach
consumers through mobile devices in a real-time format.
Rather than just selling consumer goods or services in the
local market, they can reach regional, national and
international markets.
Recommendations: (Proposed Solution)

GMCR should acquire new computers and other

modern office equipment that should be placed in various
departments. Computer programs and business software will
allow their employees to process more information than
manual methods. They should also implement business
technology to reduce the amount of human labor in business
functions. It will avoid paying labor costs along with employee
benefits. Creating computer systems would make their
company a paperless environment convenient for the
employees and lesser cost for the company.
Comments and Concerns: (Condition, Cause & Effect)

The company employs a single person (Sara) who

handle inventory management in the warehouse, reviews
inventory ledger to identify inventory needs, prepares
purchase requisition, files purchase requisition and sends
copy to accounts payable, prepares four-part purchase
order using purchase requisition, inspects, counts and
sends the packing slip to accounts payable, updates
inventory subsidiary ledger and sends an account
summary to Vic in the general ledger department. The
company lacks segregation of duties in purchases system.
Potential consequences if duties are not separated are
unauthorized or unnecessary purchases made, improper
charges made to department budgets, excessive costs
incurred and goods purchased for personal use.
Criteria: (Established Procedures/Best Practices)

To ensure proper separation of duties, assign related

buying functions to different people. With proper
segregation, no single person has complete control over all
buying activities.
Best practice is to have different people:
Approve purchases
Receive ordered materials
Approve invoices for payment
Review and reconcile financial records
Perform inventory counts
Others best practices in buying functions:
Comply with ethical buying practices and policy.
Review and update signature authorizations.
Obtain pre-approval of consultant agreements by
Verify receipt of goods and services against contract/
purchase order and invoice information.
Reconcile ledgers for accuracy of recorded
Recommendations: (Proposed Solution)

GMCR should create departments that would handle

the operations. Since they are a manufacturing company,
the production planning and control department recognizes
and authorizes the ordering of materials needed for
production. Purchasing department should prepare the
purchase order and sends copies to Inventory Control,
Accounts Payable, Receiving and the vendor. The receiving
department has the responsibility to decide whether to
accept the delivery and verify quantity and quality of the
goods delivered. Accounts Payable Department approves
vendor invoices for payment.
The accounts payable department compares the
invoice, the purchase requisition, the purchase order, and
the receiving report to understand the economic
transactions. General Ledger Department reconciles the
summary journal voucher from accounts payable and the
summary journal from inventory control. The last is
department is Cash Disbursements Department prepares
the payment and records them. Their system must be
designed so that it would take more than one employee to
successfully carry out a fraudulent act.
Comments and Concerns: (Condition, Cause & Effect)

Fayth handles the major functions in the cash

disbursement cycle of GMCR. She has a sole control over
the transactions from payment to recording while Vic has a
limited role in the general ledger department. There is lack
of segregation of duties in its cash disbursement system. In
this case, there are irregularities that may happen such as
paying for goods not received, paying the same invoice
twice, recording and posting errors in accounts payable,
misappropriating cash or checks, failing to catch errors in
vendor invoices and other fraudulent activities.
Criteria: (Established Procedures/Best Practices)

Segregation of duties means that no financial

transaction is handled by only one person from beginning to
end. For cash disbursements, this might mean that different
people authorize payments, sign checks, record payments in
the books, and reconcile the bank statements. The person who
signs the checks and mails them to the supplier must be
separated from record keeping for the assets by the
accounting department specifically accounts payable and
general ledger. In an ideal system, different employees would
perform each of these four major functions. In other words, no
person should have control of two or more of these
responsibilities. The more negotiable the asset, the greater the
need for proper segregation of duties, especially when dealing
with cash, negotiable checks and inventories.
Recommendations: (Proposed Solution)

Aside from Fayth who is assigned in

accounts payable, GMCR should assign other
employee to handle invoicing because it should
be separated from AP function to avoid
processing transactions at the wrong price/term
or payments made for items not received,
overpayment of goods and theft of cash. Another
employee should be assigned on Disbursement
function because it should be segregated from
the AP function to avoid unauthorized checks
supported by fictitious documents that may be
issued and unauthorized transactions will be
Comments and Concerns: (Condition, Cause & Effect)

GMCRs transaction records are mostly in the form

of hard copy. Every employee maintains its own record
that can easily be accessed. Aside from individual record
keeping, they dont have a centralized record keeping
handled by a single person or a computer system.
Loosing important documents and alteration or
unauthorized disclosure of data might happen.
Criteria: (Established Procedures/Best Practices)

Access to records must be limited to proper

safeguarding. Indirect access to assets of the company can
be achieved by gaining access to records and documents
that control the use, ownership, and disposition of the
asset. Companies can control the use of documents and
records by segregating the duties of those who must
access and process records. Records must be protected
and backed up. Safeguarding of records is possible through
the use of computer with security access. Processing
capabilities and storage capacity of computers have made
electronic storage and retrieval of information a common
practice in business.
Computer-generated document management,
records management software, and imaging systems assist
businesses with large volumes of records. Imaging systems
convert all types of documents to digitized electronic data
that can be stored and retrieved quickly. With the advent of
super high-density magnetic storage and online storage,
this will be much less of an issue in the future.
Recommendations: (Proposed Solution)

GMCR should create a computer-generated record

management for updated recording and assign an
employee to handle the record keeping preventing
unauthorized access. Through computer system recording,
transactions through hard copy will be minimized and
retrieval of information will be easier. Individual records of
employees in purchases system and cash disbursements
systems must be protected using file labels, back-up and
disaster recovery plans and access controls.