CASE 3.5
GOODNER BROTHERS, INC.
Synopsis
Woody Robinson and Al Hunt were lifelong friends. Following graduation from college, Al
went to work for his father-in–law, who owned Curcio’s Auto Supply, a retail business located in
Huntington, West Virginia. With the help of Al, Woody landed a job with one of Curcio’s major
“Volume, volume, volume” was Goodner’s operating philosophy. Company management
consistently undercut competitors’ prices to increase sales and market share. The company’s thin
profit margin forced Goodner’s executives to scrimp on operating expenses, including expenditures
on accounting and control systems. Goodner attempted to compensate for its weak internal controls
by hiring only honest and reliable employees. The company generally considered only prospective
employees referred by someone associated with Goodner Brothers. Goodner also routinely obtained
thorough background checks on prospective employees from detective agencies.
In 2006, Woody Robinson faced a personal crisis brought on by a gambling addiction. Woody
began stealing tires from his employer to pay off his sizable gambling debts. Goodner’s lax internal
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Goodner Brothers, Inc.—Key Facts
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1. Goodner Brothers’ principal management strategy was to undermine competitors by selling tires
in large volumes at cut rate prices.
3. A key factor that caused Woody Robinson to decide to steal from Goodner Brothers was the
weak and often nonexistent internal controls at the company’s Huntington sales office.
5. The failure of Felix Garcia, the manager of the Huntington sales office, to follow up on the
6. During their annual audits of Goodner Brothers, the company’s independent auditors paid little
attention to Goodner’s internal controls, choosing instead to perform a “balance sheet” audit.
8. Woody ultimately served seven months of a five-year prison term for stealing an estimated
$185,000 of tires from Goodner Brothers.
10. Al Hunt sued Woody Robinson in an unsuccessful attempt to recover the payment made by
Curcio’s to Goodner’s insurer.
Instructional Objectives
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1. To stress the importance of rigorous internal controls for companies that have heavy investments
in inventory.
2. To demonstrate that a policy of hiring only “honest and reliable” employees cannot compensate
for a company’s otherwise weak or nonexistent internal controls.
3. To demonstrate the significant losses that one dishonest employee can impose on a company
that has weak internal controls.
Suggestions for Use
An effective means of initiating classroom discussion of this case is to develop a role-playing
scenario involving Woody Robinson and Al Hunt. In this scenario, ask two students to recreate the
meeting in which Al questions Woody regarding the source of the tires he has been selling. Ethical
issues are not stressed explicitly in this case. However, here is an opportunity for students to
in an accounting or auditing context.
Another common method I use to introduce a case such as this is to provide students with a
“responsibility ballot” that lists each person or group of persons who played a significant role in the
case. In this case, those individuals would include Woody Robinson, Al Hunt, Felix Garcia, the two
company owners, Goodner’s CFO, and Goodner’s independent audit firm. In my graduate class, I
then assign students to small groups. Each group must complete the responsibility ballot by
assigning a percentage of responsibility or culpability to each individual or group listed on the ballot.
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The narrative of this case does not heavily emphasize the role played by Goodner Brothers’
independent auditors in the theft scheme perpetrated by Woody Robinson. The exercise just
described and/or the fourth case question provides an opportunity for instructors to focus students’
Suggested Solutions to Case Questions
1. (a) Provide adequate physical security for inventory to minimize losses due to customer
and employee theft.
(b) Identify inventory shortages on a timely basis.
2. (a) Physical security controls for inventory were extremely lax.
(b) Custodianship, authorization, and recordkeeping responsibilities were not properly
3. (a) One sales office employee could have been assigned “warehouseman”
responsibilities
for the remote storage area. This individual would have maintained on-site inventory
records, checked in shipments from vendors, checked out shipments to customers,
maintained a log of individuals entering the storage area, etc. In addition,
management could have installed electronic surveillance equipment to deter and
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documents for all transactions and mandated timely recording of all transactions.
(Note: Besides taking intra-year inventory counts at the company’s sales offices,
Goodner’s internal auditors could have been required to perform periodic
4. Refer to the “Suggestions for Use” section for an overview of a group assignment that may be
used with this case question.
Listed next are parties that may have been at least partially responsible for the theft losses
suffered by Goodner Brothers at the hands of Woody Robinson.
T.J. and Ross Goodner: The management style and operating philosophy of Goodner’s two
owners created a weak control environment within the company. The existence of a weak
control environment may eventually tempt employees to take unfair advantage of a company. In
Goodner’s CFO: As the chief financial executive for Goodner Brothers, the company’s CFO
should have been aware of the need for, and importance of, reliable internal controls, particularly
for the company’s large investment in inventory.
Goodner’s independent auditors: Independent auditors must obtain a sufficient understanding
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those controls might have prompted the auditors to discuss Goodner’s pervasive control
weaknesses with top management.