Case Carolina-Wilderness-Outfitters-Case-Study PDF
Case Carolina-Wilderness-Outfitters-Case-Study PDF
Case Carolina-Wilderness-Outfitters-Case-Study PDF
BOARD OF DIRECTORS
Thomas Wilcox, Chairman of the Board
Ann Dawson, CEO
Robert Henderson, Board Member
Janice Quill, Board Member
Mark Sentor, Audit Committee Chair
Norton Bell, Audit Committee Member
George Li, Audit Committee Member
EXECUTIVE TEAM
Ann Dawson, CEO
Christine McCoy, CFO
Bud Stimson, Head of Hunting Division
Steve Bauer, Head of Fishing Division
Rocco Merli, Head of Apparel Division
Sue Ramos, Head of Internal Audit
OTHER EMPLOYEES
Mark Tomkin, Head of Apparel, Texas Region
Betty Koster, Apparel Division Accounting Support Team, recently terminated
Simon Peel, Accounting Manger
This case study was developed as a joint effort by the Center for Audit Quality,
Financial Executives International, The Institute of Internal Auditors, and
the National Association of Corporate Directors. These four organizations
have formed the Anti-Fraud Collaboration to actively engage in efforts to
mitigate the risks of financial reporting fraud. The Collaboration’s goal is to
promote the deterrence and detection of financial reporting fraud through
the development of education, programs, tools and other related resources.
For more information about the Anti-Fraud Collaboration and its resources
please visit www.AntiFraudCollaboration.org.
© Copyright 2014
Sue Ramos, head of internal audit at Carolina Wilderness Outfitters (CWO), found herself at a decision
point. One month earlier, following an ex-employee’s call to the company’s ethics hotline, Ramos
launched what had seemed like a routine investigation into a claim of improper termination. She
had thought the investigation was winding down until last week, when it turned up a new allegation
of possible accounting irregularities. The new allegation, however, was not well substantiated. Her
instincts told her that she should pursue the matter further, but she also knew that it would be difficult
to do so. She had little reason to believe the investigation would turn up something significant, and
she had a full plate of work already and few resources she could assign to the task. A further concern
was that CWO was one week away from its SEC filing date for its third quarter financial statements,
and company management would be in no mood for a distraction without strong supporting data.
Ramos considered her various options: should she notify management of her concerns, bring it to the
attention of the audit committee, and/or alert the external auditor. Alternatively, she wondered whether
she should just focus on her other high-priority work and not pursue what would, in all probability, not
amount to anything material.
CAROLINA WILDERNESS OUTFITTERS (A) accounted for half of CWO sales, with the remaining sales
approximately evenly split across Hunting and Fishing.
Carolina Wilderness Outfitters was a publicly traded
specialty retailer that sold gear and apparel to outdoor CWO carried both its own brands and a selection of
enthusiasts. Founded in North Carolina with just one leading national brands. It sourced a large majority of
small store in the 1930s, the company grew slowly for its products from major suppliers, but the company still
fifty years and attracted a loyal local following. In the manufactured a few apparel products, mostly camouflage
1980s, a small group of investors saw great potential in clothing, in its own plant in Texas. CWO maintained
CWO and bought a majority stake in the business from a company website to promote its stores and provide
one member of the founding family. Other members of general information about the company, but it had only
this family continued to hold a 20 percent ownership recently begun exploring opening an internet channel to
stake. The new majority owners took the company sell its products online.
public with a successful IPO and grew the business by
building new and larger stores throughout the southern
and eastern states. CWO now had 35 stores in six states. COMPANY STRATEGY
Texas, with 12 stores, and Pennsylvania, with eight stores, CWO had built its reputation by offering quality products
accounted for nearly two-thirds of the company’s $310 and superior service. It targeted mid- and upper-income
million in annual sales. Because of the importance of the consumers with enough disposable income to purchase
fall hunting season to its business, a disproportionate
that special item to complement their vacation or hobby
share of its sales came in the late summer and early fall.
experience. CWO sales associates were some of the best
Headquartered in Hendersonville, North Carolina, in the industry in terms of product knowledge, outdoor
CWO organized its divisions around its three main experience, and an ability to connect with customers.
product groups: Hunting, Fishing, and Apparel. The CWO located its stores in tourist towns close to fishable
Hunting division sold rifles, shotguns, air guns, waters, in areas open to hunting, or areas with high levels
ammunition, optics, hunting blinds, and other gun and of outdoor recreational activity where shoppers were ready
hunting related gear. The Fishing division offered rods, to buy. For the past decade, CWO had pursued a strategy
reels, fishing tackle, lures, live bait, nets, canoes and of steady, sustainable growth. It opened a new store every
small fishing boats, and boat accessories. The Apparel couple of years and company management focused on
division sold hunting and fishing clothing, jackets, running each store profitably, increasing same-store-sales
raingear, camouflage clothing, footwear, and other annually, and only opening a new store when it found a
apparel for outdoor activities. The Apparel division good location in the right area.
Ramos then called Koster and invited her in to talk Red flags started going up for Ramos as Koster treaded
about why she called the hotline. At the meeting, Koster into more dangerous territory than an isolated complaint
explained that she was shocked at the firing because she of age discrimination. Ramos asked Koster if this had
had never been terminated from any job. She continued ever happened before. Koster indicated she was not
by indicating she had always liked working at CWO comfortable getting into any more specifics, but remarked
and thought she did a good job. “Eight years of good that she thought her accounting support colleagues
performance reviews ought to show that,” she said. In the had let themselves get too chummy with the sales staff.
end, she concluded, it must be a case of age discrimination. Ramos didn’t get much more detail on the phone. Ramos
For more information about the Anti-Fraud Collaboration and its resources,
please visit www.AntiFraudCollaboration.org.
0214-250