Priority Freight Costs: An Experiential Introduction to Operational Auditing

Abstract

In auditing courses, internal controls are presented as the policies and procedures used to help ensure the accuracy of the financial statements. This case demonstrates that adequate internal controls and the proper alignment of authority and performance can have an impact on profitability. Through interviews and data collected based on a real corporation, students can observe how employees utilized priority shipping on raw material purchases to improve the performance metrics of their purchasing managers. The case exposes students to the operational auditing process, the necessity of designing appropriate performance metrics, and the impact of properly designed internal controls on operating costs.