E5-48. (Learning Objectives 1, 2: Learning about fraud; evaluating internal controls over cash payments; focusing on ethical considerations) Shirley Hopper, the owner of Shirley’s Perfect Presents, has delegated management of the business to Leslie Temple, a friend. Hopper drops by to meet customers and check up on cash receipts, but Temple buys the merchandise and handles cash payments. Business has been very good lately, and cash receipts have kept pace with the apparent level of sales. However, for a year or so, the amount of cash on hand has been too low. When asked about this, Temple explains that suppliers are charging more for goods than in the past. During the past year, Temple has taken two expensive vacations, and Hopper wonders how Temple can afford these trips on her $60,000 annual salary and commissions.

List at least three ways Temple could be defrauding Hopper of cash. In each instance also identify how Hopper can determine whether Temple’s actions are ethical. Limit your answers to the store’s cash payments. The business pays all suppliers by check (no EFTs).