1)

Lyle Steinberg has recently been hired as the manager of Laramie Coffee, a national chain of franchised coffee shops. During her first month as store manager, Lyle encountered the following internal control situations:

a. Laramie Coffee has one cash register. Prior to Lyles joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Lyle made one employee on each shift responsible for taking orders and accepting the customers payment. Other employees prepare the orders.

State whether you agree or disagree with Lyles method of handling each situation?

b. Since only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches the amount of cash sales recorded by the cash register. Lyle expects each cashier to balance the drawer to the penny every timeno exceptions.

State whether you agree or disagree with Lyles method of handling each situation?

c. Lyle caught an employee putting a case of single-serving tea bags in her car. Not wanting to create a scene, Lyle smiled and said, I dont think youre putting those tea bags on the right shelf. Dont they belong inside the coffee shop? The employee returned the tea bags to the stockroom.

State whether you agree or disagree with Lyles method of handling each situation?

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2)

Sherrys Fashions is a retail store specializing in women's clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $100. If the item is more than $100, a check is mailed to the customer.

Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible.

This year, returns at Sherrys Fashions reached an all-time high. There are a large number of returns under $100 without receipts.

a. How can sales clerks employed at Sherrys Fashions use the store's return policy to steal money from the cash register? MCQ Options: A) By not issuing a refund but restocking the merchandise B) They can't C) By writing phony refunds and pocketing cash

b. What internal control weaknesses do you see in the return policy that make cash thefts easier? MCQ Options: A) Only 1 employee has custody of valuable assets B) They have component personnel, rotating duties, and mandatory vacations C) There is too much separation of responsibilities for related operations D) Operations is separate from accounting

c. All of the following are advantages of issuing a store credit rather than a cash refund except: MCQ Options: A) The possibility of stealing cash is reduced B) The overall level of returns/exchanges may be reduced C) The company is less likely to experience a cash drain during the weeks immediately following the holiday D) Store credits will keep clerks from committing fraud

d. All of the following are changes that Sherrys Fashions could make to improve the internal controls for issuing cash refunds without a receipt except: MCQ Options: A) Get a supervisor's authorization for a refund prior to giving it to customer B) Use secruity measures like camera to monitor cash removed without customer present C) Assign an employee from another shift to restock returned merchandise and reconcile refunds D) Give customers choice of cash refunds or exchange credits