Fenwick, the internal auditor for Discount Department Stores, hated traveling but since he covered all 14 discount stores in his district, he was on the road constantly. This time he was in Grapevine, Texas. Located near the end of Dallas/ Fort Worth International Airport runways, the Grapevine's store windows shook every few minutes as each jet lumbered into the air.
It was evening and the store was empty except for the piles of financial records surrounding him. The Grapevine operation had lost money for three straight years, had closed the previous month, and its remaining inventory had been divided among other locations. Fenwick's instructions were clear: Find out what went wrong? He was about to reach for his last steaming cup of coffee-filled to the brim- when a jolt from yet another jet, the loudest of the day, spilled his coffee. This, in turn soaked the bank slips on his desk.
Fenwick got up and spread the dozen or so deposit slips on the carpet to dry. He then cleared the rest of the mess and returned his attention to the stained papers on the floor. He stacked the slips one by one, glancing at them casually. After looking at just a few, he spotted a distinct abnormality.
Fenwick had been around the other stores enough to know that currency and other checks represented about half the money going into their bank accounts; credit card deposits made up the rest. However, the documents in his hands were a different mix-three quarters credit card, one quarter cash. Also, Fenwick spotted a refund of exactly $300 on one day's tape and a refund of $400 on the next day's tape (Wells, 2002).
Required: Discuss in detail at least three missing internal controls, the reasons why these controls are important, and a remedy to avoid future fraud in the case of Discount Department Stores.