A) The case demonstrates the problems that can ensue when a company lacks a system of Internal Control. Westchester Distributing Inc. is a beer distributing enterprise founded in 1962 by Vince Patton. Company grew from 20 employees to 60 employees over 10 year period from 1980 to 1990. Case involved violation of Alcoholic Beverage Control regulations by 3 employees. Those involved were
1. Carter Mario, a salesman and 2. George Pavlov a sales manager. They gave kickbacks of $1.00 per case to a customer to induce him to buy 100 cases of slow moving beer called Rising Sun. Paid out their own pocket, then sought reimbursement by submitting falsified receipt for lunch expense and falsified reimbursement request for broken bottles. Joe Roberts, Vice president of Administration aware of their action and signed approval of receipts and also offered bribe in form of neon sign to customer to prevent him from returning merchandise which he had hard time selling. Company measured success in terms of cases per stop, Mario and Pavlov motivated by bonuses they would receive if they met quotas. There was lack of integrity, Mr. Carter also reported feeling disconnected from management and seems employees did not feel that what they did was serious violation of ABC regulations and Federal Law.
Control Environment- employees in this case demonstrated lack of integrity and ethical values. Employees also seemed to disagree with management’s philosophy and operating style.
Risk assessment- Formal written procedures did not exist to guide employees and the standards of conducts did not specify the ABC regulations