Professional Documents
Culture Documents
Walker Books Inc.: Prepared By: Barcelon, Roselle Chavez, Melissa Grace Manaois, Jonah M. Reyes, Anne Clarisse
Walker Books Inc.: Prepared By: Barcelon, Roselle Chavez, Melissa Grace Manaois, Jonah M. Reyes, Anne Clarisse
Prepared by:
Barcelon, Roselle
Chavez, Melissa Grace
Manaois, Jonah M.
Reyes, Anne Clarisse
Case Background
Walker Books, Inc., is the fastest-growing book distributor in the United
States. Established in 1981 in Palo Alto, California, Walker Books was
originally a side project of founder and current president Curtis Walker, who
at the time was employed by a local law firm.
He then decided to use some of his savings to buy an abandoned restaurant
and convert it into a neighbourhood bookstore, mainly selling used books that
were donated and obtained from flea markets.
When the store first opened, Mr. Walker’s wife, Lauren, was the only
employee during the week and Curtis worked weekends. At the end of the
first fiscal year, Walker Books had grossed $20,000 in sales. After some time,
he then quit his job at the law firm to fully concentrate on operating the
bookstore.
More employees were hired, more books were traded in, and more sales were
attained each year that passed.
In 1995, Walker’s sales started to decline because of increased competition
which are large upscale bookstores being built in the area and because of the
use of the Internet for finding and ordering books which was\\as becoming
cheaper and more popular for current customers.
Deciding to take a risk because of the newfound competition, he closed his
doors to the neighborhood, invested more money to expand the current
property, and transformed his company from simply selling used books to
being a distributor of new books.
His business model was to obtain books from publishers at a discount, store
them in his warehouse, and resell them to large bookstore chains.
Walker Books, Inc., has rapidly become one of the largest book distributors in
the country.
Although they are still at their original location in Palo Alto, California, they
distribute books to all 50 states and because of that, the company now sees
gross sales of about $105,000,000 per year
Statement of the Problem
The main problem that Walker Books Inc. is currently facing are poor
inventory management, troublesome disbursements and lack of legitimate
documentation of transactions.
Alternative Courses of Action to address
the problem:
a.) SUPERVISION
Walker company must have an authorize person, known as the checker to
assist the checking and the flow of inventories in the warehouse.
They must implement a controller department.
The cash receipts department typically reports to the treasurer who has
responsibility for financial assets.
Since the company encounters delivery delays, they must have a carrier
department so that inventories will be turned over to customers or to other
branches as fast as possible to prevent inventory stock outs.
b.) SEGREGATION OF DUTIES
Walker Company must have tasks dispersed to different departments.
In order to maximize time and maximize the order sales, Walker Company
must be able to see that different departments are assigned with their
specific tasks.
Risk:
AP clerk may misappropriate company funds and disguise the fraud by
adjusting the AP books
Recommendation:
Separate the functions of the Accounts Payable from Cash
Disbursements
Recommendation
Independent verification
Condition:
Receiving department does not send a copy of the receiving report to
the Accounts Payable department
Risk:
Recorded obligations to suppliers might not have a legitimate basis
(e.g. no physical receipt of goods)
Recommendation:
Have the receiving department forward a copy of the receiving report
to the AP department for reconciliation purposes.
Recommendation
Supervision
Condition:
Goods that arrive are not manually inspected and reconciled with the blind
copy of the PO
Risk:
Amount and condition of goods received may not be the same as that which
was ordered
Recommendation:
Separate the functions of the Accounts Payable from Cash Disbursements
Recommendation
Accounting documentation and records
Condition:
Invoices received are discarded after writing the check
Voucher and supporting documents are not given to the Cash Disbursement department
for check approval; no official list of qualified vendors/suppliers is maintained
Risk:
Lack of audit trail
Payment for unauthorized purchases might occur
Recommendation:
Maintain a file of received invoices for record-keeping purposes
Provide sufficient supporting documents to evidence that the disbursement to be made
is legitimate to a known and existing supplier
Recommendation
Transaction authorization
Condition:
Purchasing agent has complete autonomy over the purchasing decisions of
the company
Risk:
May result in excessive inventory levels
Recommendation:
Implement a system of purchase order authorization