Acct 544: Case 2 Assignment

1. Identify the devices (controls) that Al Fiorini used to control his business both before and after he went back to school. Classify each control as a results, action, or personnel/cultural type of control.

Action control: Before he went back to school

• Although “AHL did not yet have electronic links to the processors files that would allow monitoring of the progress of the applications before they were submitted”, but as a compensating control, “Al monitored the activities of his loan officers by tracking the number of credit inquiries each requested”. (Merchant and Van der Stede, 2007, P115) This provided an early indication of how many applications were being submitted. Al also closely monitored loan application per lead ratios and their trends. These are all forms of action accountability under action control where Al “observing or otherwise tracking what happens.” (Merchant and Van der Stede, 2007, P97)

• At closing, AHL received its funds directly from the proceeds. A broker’s check would be overnight mailed to AHL’s office or the money would be wired directly into AHL’s general account. This is physical constraint.

Action control: After he went back to school

• By not letting Wilbur sign the checks written against AHL’s main bank account Al has placed an administrative constraint on him-restriction of decision-making authority. Al must approve all outflow of cash from his company, this is an example of pre-reaction reviews.

• Although Al was no longer able to monitor the day to day operations of the company, he tracked the employee head count, number of leads, credit inquiries, loan applications funded, office expenses and bank activity. By monitoring these actions Al can hold employees accountable for desired actions or undesired actions. “Al was also on the phone 3–4 hours per day talking with employees. He thought that this would allow him to monitor the employees’ emotional states, important leading indicators of forthcoming company...