Bronys Bikes Personnel

In 20X1, Trevor Lawton assumed control of Bronys Bikes after the retirement of his father, the founder of the company. The Lawton family presently owns 25 percent of the outstanding Bronys Bikes common stock; the remaining 75 percent is held by nonfamily members. Bronys Bikes is not subject an issuer thus does not report to the U.S. SEC. Lawton managed conservatively when first becoming CEO and president of Bronys Bikes. In recent years he has become increasingly aggressive, believing that strategic changes must be bold, frequent, and swift in order to prevail in the highly competitive bicycle industry. He has worked to make his management perspective the basis of Bronys Bikes corporate culture. Lawton believes that success can be achieved via aggressive marketing and containment of production costs. As a result of devoting most of his attention to sales and production, he is relatively detached from financial reporting matters including controls over financial reporting. Lawton generally views the accounting function as a necessary evil conducted by bean counters that dont seem to understand the need for Bronys Bikes financial statements to look good. Consistent with these views, the accounting group has received modest allocations of resources in recent years, and operates with a relatively small, but seemingly competent and trustworthy staff.

Reflecting Lawtons preference for centralized management, Lawton and the vice presidents of production and marketing determine Bronys Bikes objectives and strategic plan with little input from other managers. Once determined, the objectives and strategic plan are not widely disseminated to employees, but are presented for feedback and approval at board of directors meetings. Privately, some managers and board members believe the financial objectives to be overly optimistic and unlikely to be achieved. In addition, many middle and lower-level managers feel the supporting budgets lack the necessary resources to meet financial objectives.

For the past couple of years, Lawton has been unable to devote the time he would like to identifying and managing an increasing array of risks. To address this problem, Lawton has begun forming an enterprise risk management team comprised of managers with finance, marketing, and production expertise. The team would manage risks from both internal and external sources, and report directly to Lawton. Because of heavy demands on his time, Lawton has not been able to finalize formation of the risk management team. Currently, the mechanisms in place for identifying, analyzing, and acting on risk matters are unstructured and vary in quality from department to department. For example, risk management in production and procurement is known to be rather weak, while the corporate controller is thought to be doing quality risk management regarding financial reporting and information systems matters.

Gerald Groth, the corporate controller of Bronys Bikes, has been with the company since receiving his MBA ten years ago. Groth is also a CPA and was a staff accountant with Vaughan & Co. for five years just prior to joining Bronys Bikes. Other Bronys Bikes personnel include:

Elmer Fennig, vice president, production;

Charles Gibson, vice president, marketing;

Marlene McAfee, treasurer;

Laura Schroeder, director of human resources;

John Mesarvey, chief accountant;

Glenn Florence, director of internal auditing; and

Malissa Rust, director of Computer Based Information Systems (CBIS).

Mesarvey, Florence, and Rust report to Groth. Emil Ransbottom, the director of purchasing, as well as the plant manager and the factory supervisors, report to Fennig. Three personnel officers report to the director of human resources. Bronys Bikes has three product managers: one for touring bikes, one for mountain bikes, and one for stationary bikes. The sales staff reports to the product managers and the product managers report to Gibson. Under Mesarvey, the chief accountant, are Harriet Smith, transaction processing; Oliver Perna, cost accounting; and Janice Hollins, financial statements.

The reporting relationships at Bronys Bikes have changed little since the companys incorporation even though Bronys Bikes has experienced considerable growth in production volume and the warehouse distribution network, as well as a major transformation of its information system. However, over time responsibilities and authority for decision-making have become more centralized.