Green Mountain Coffee Roasters, Inc.

(Prepared by Ronica Sharma, Lehigh University)

Green Mountain Coffee Roasters, Inc., was founded in 1981 and began as a small
cafe in Waitsfield, Vermont, roasting and serving premium coffee on the premises. Green
Mountain blends and distributes coffee to a variety of customers, including cafes, delis,
and restaurants, and currently has about 6,700 customer accounts reaching states across
the nation. As the company has grown, several beverages have been added to their
product line, including signature blends, light and heavy roasts, decaffeinated coffee and
teas, and herbal teas. Green Mountain Coffee Roasters, Inc., has been publicly traded
since 1993.

Green Mountain Coffee has a warehouse and manufacturing plant located in

Wilton, Vermont, where it presently employees 250 full-time and part-time workers. The
company receives its beans in bulk from a select group of distributors located across the
world, with their largest supplier being Columbia Beans Co. Green Mountain Coffee also
sells accessories that complement their products, including mugs, thermoses, and coffee
containers that they purchase from their supplier, Coffee Lovers, Inc. In addition, Green
Mountain purchases paper products such as coffee bags, coffee cups, and stirrers, which
they distribute to their customers. Green Mountains accounting system consists of
manual procedures supported by stand-alone PC located in various departments. Because
these computers are not networked they cannot share data digitally, and all
interdepartmental communication is through hard-copy documents. Green Mountain is a
new audit client for your CPA firm and as manager on the assignment you are examining
their internal controls. The expenditure cycle is described in the following paragraphs.

Purchases System
Green Mountain Coffee purchases beans and blends from manufactures and then
sells them to customer stores. Sara is in charge of inventory management in the
warehouse. From her PC, she reviews the inventory ledger to identify inventory needs.
When items fall to their pre-established reorder point, she prepares a purchase
requisition. She keeps a copy in her department for use later, files one in the open
purchase requisition file, and sends a copy to accounts payable. At the end of the day, she
uses the purchase requisitions to prepare a four-part purchase order. One copy is filed,
two copies are sent to the supplier, and one copy is sent to Fayth in the accounts payable
department. When the goods arrive, Sara inspects and counts them and sends the packing
slip to accounts payable. Using a PC, Sara updates the inventory subsidiary ledger and, at
the end of day, sends an account summary to Vic in the general ledger department.

After checking that the purchase requisition and purchase order exist to support
the packing slip, Fayth files the documents in the accounts payable pending file. The
suppliers invoice is mailed directly to Fayth, who checks it against the documents in the
pending file. Using a computer system, she updates the accounts payable subsidiary
ledger and records the transaction in the purchases journal. She then files the purchase
requisition, purchase order, packing slip, and invoice in the open accounts payable file.
At the end of the day, she prepares a journal voucher, which is sent to Vic in the general
ledger department. Using a separate computer system, Vic updates the control accounts
affected by the transactions and files the summary and journal vouchers.

Cash Disbursements System Summary

Fayth reviews the open accounts payable file for items due for payment, waiting
until the last date to make a payment and still take advantage of the discount. From her
PC, she then updates (closes) the appropriate accounts payable subsidiary record, prints a
two-part check, and records the payment in the check register file. At the close of day,
Fayth mails the check to the supplier, files a copy, and prepares a journal voucher, which
goes to Vic. Vic records the transaction in the affected general ledger accounts and files
the journal voucher

Required:
Prepare an internal audit summary report for each weaknesses or deviations
identified.
AUDIT REPORT SUMMARY Audit Report No. 2016-001

Comments and Concerns: (Condition, Cause & Effect)

Condition:
Green Mountain Coffee Roasters, Inc. was founded in 1981 and has been publicly
traded since 1993 and now they are growing.

Cause:
We found out that the competition in specialty coffee is intense.

Effect:
In result, the Green Mountain Coffee Roasters, Inc., need to expand to compete over
competitors.

Criteria: (Established Procedures/Best Practices)

Benefit of new customer expansion, retain new customers & be widely known.

Recommendations: (Proposed Solution)

.
Green Mountain Coffee Roasters Inc., spent a lot of years distributing coffee to
various customers, including cafes, delis and restaurants, and now they should open a
new angle in investing branches to achieve their main objectives to expand and more
profitable in the business world.

Chief Audit Executive: RECHIE M. BASAS Date: February 17, 2017

AUDIT REPORT SUMMARY Audit Report No. 2016-002

Comments and Concerns: (Condition, Cause & Effect)

Condition:
Green Mountain Coffee Roasters, Inc., accounting system only consists of manual
procedures supported by stand-alone PC located in various departments and are not
networked as well.

Cause:
Since the Green Mountain Coffee Roasters, Inc. was founded in 1981 and publicly
traded in 1993, it is normal that they use the manual procedure or the prior accounting
system.

Effect:
In result, it cannot share data digitally, and all interdepartmental communication was
three hard-copy documents. (Current accounting system).

Criteria: (Established Procedures/Best Practices)

To be more convenient in documenting records, transactions and communication.

Recommendations: (Proposed Solution).

They should lessen in using the accounting system than manual procedures provided
the stand-alone PC and need to adopt in computer networking Green Mountain Coffee
Roasters, Inc. has grown so it is very important particularly in growing companies
who are greatly in need to produce huge number of resource to share their files easily
and communicate w/ softcopy to other departments. In addition, they need to adopt the
database accounting for relevant, network capability, efficient time and to reduce the
cost in documentation, recording supplies, inventories and communication.

Chief Audit Executive: RECHIE M. BASAS Date: February 17, 2017

AUDIT REPORT SUMMARY Audit Report No. 2016-003

Comments and Concerns: (Condition, Cause & Effect)

Condition:
Green Mountain Coffee Roasters, Inc. has only two (2) employees in charge both
Purchasing System and Cash Disbursement System.

Cause:
We found that the Green Mountain Coffee Roasters, Inc. had only 250 full-time and
part-time workers employed.

Effect:
.
In result, the process and business transaction will take time to progress.

Criteria: (Established Procedures/Best Practices)

.
Efficiency of time man agreement, transaction & records for business operation.

Recommendations: (Proposed Solution)

Green Mountain Coffee Roasters Inc., is a distributor of coffee to a variety of
customers, including cafes, delis and restaurant, and currently has 6700 customer
accounts reaching states across the nation. In transaction process and recording it
happened every day, it is difficult if only one or two employees are working with the
procedure and possibly will take time and will affect the whole company or business
operations. We believe in order to avoid this circumstances, the Green Mountain
Coffee Roasters, Inc., needs to hire sufficient Man power specially that they only have
250 full time & part-time workers. As a growing company, Green Mountain Roasters,
Inc. should segregate the duties of their employees whom should be assigning in
recording transaction to fix the adequacy of timeliness of the operations

Chief Audit Executive: RECHIE M. BASAS Date: February 17, 2017

Saint Paul School of Professional Studies
Palo, Leyte

In Partial Fulfilment
For the Requirement in
Internal Auditing

MWF (4:00-5:00PM) / TTh (4:00-5:30)

Submitted by:

Basas, Rechie M.
Dublin, Emmiejoy U.
Nedruda, Rochelle Vae N.
Olimpo, Rowelina L.
Quilaquil, Mary Grace G.

Submitted to:

Paul Anthony Manilag, CPA