Eraud Examination Case: Crafty Cash Theft? INTRODUCTION indy Nyglens owns a small craft shop in downtown Sun Prairie. Last week, Cindy received an anonymous typed note in an unstamped envelope, left on her desk. The note read: cindy: One of your employees is stealing cash and robbing you blind. A concerned friend None of her employees knew where the envelope came from when she questioned them about its appearance. Cindy is obviously concemed, but unsure how to go about investigating the tip herself. She contacted you for assistance. You arrange to observe store operations, under the premise of providing feedback as a consultant for improving and streamlining business operations. Cindy has been trying to grow her business in the past seven months by increasing advertising and promotions (including a new coupon discount program, effective June 2012) and expanding product offerings, so this is a feasible explanation to her employees. You make the following observations: - Cindy has five employees-four clerks (Angela, Becky, Susic, Wanda), who assist customers and conduct sales transactions, and a store manager (Lisa), who oversees the clerks, handles minor customer issues, summarizes and records daily sales, and prepares bank deposits. Cindy monitors perpetual inventory rocords and orders inventory, pays bills, handles payroll, takes deposits to the bank, and reconciles bank statements. - The store is open Tuesday through Saturday. Lisa, Angela, Susic, and Wanda each work Tuesday through Saturday. Becky is a high school student who only works Saturday. - There are two electronic registers. Each employee must enter a unique code in order to access the registers. Clerks bave full authority for entering all types of transactions in the registers. The registers read inventory barcodes, so transactions automatically update Cindy's perpetual inventory records. The registers issue two copies of receipts-one copy for customers and one copy for the store-in addition to recording all register actions on a register tapo. - Cindy accepts only cash or credit card payments from customers. There is one credit card machine thit sits on a counter behind the two cash registers. - Cindy uses small business accounting software for all accounting purposes. Lisa has access to the sysiem to record sales data and to prepare bank deposits. Cindy handles all other accounting functions in the system. Cindy and Lisa each have their own locked office in the back of the store. In addition, you obtain from Cindy select monthly income statement data for the past two years (see Table 1). Identify a list of fraud schemes that may be occurning at Cindy's store. Then consider what your next step would be to approach the investigation and why this is your next step. For example, TABLE 1 APPENDIX B Student Handout Cash Sales and Credit Card Sales Table 2 Cash Sales and Credit Card Sales APPENDIX C Student Handout Net Sales by Employee Table 3 Net Saies by Employee APPENDIX D Student Handout Refunds, Discounts, Voids, and "No Sale" Transactions by Employee Table 4 Figure 2 Refunds by Employee Table 5 Discounts by Employee Table 6 Vnide hu R mnlnvae Table 7 Eraud Examination Case: Crafty Cash Theft? INTRODUCTION indy Nyglens owns a small craft shop in downtown Sun Prairie. Last week, Cindy received an anonymous typed note in an unstamped envelope, left on her desk. The note read: cindy: One of your employees is stealing cash and robbing you blind. A concerned friend None of her employees knew where the envelope came from when she questioned them about its appearance. Cindy is obviously concemed, but unsure how to go about investigating the tip herself. She contacted you for assistance. You arrange to observe store operations, under the premise of providing feedback as a consultant for improving and streamlining business operations. Cindy has been trying to grow her business in the past seven months by increasing advertising and promotions (including a new coupon discount program, effective June 2012) and expanding product offerings, so this is a feasible explanation to her employees. You make the following observations: - Cindy has five employees-four clerks (Angela, Becky, Susic, Wanda), who assist customers and conduct sales transactions, and a store manager (Lisa), who oversees the clerks, handles minor customer issues, summarizes and records daily sales, and prepares bank deposits. Cindy monitors perpetual inventory rocords and orders inventory, pays bills, handles payroll, takes deposits to the bank, and reconciles bank statements. - The store is open Tuesday through Saturday. Lisa, Angela, Susic, and Wanda each work Tuesday through Saturday. Becky is a high school student who only works Saturday. - There are two electronic registers. Each employee must enter a unique code in order to access the registers. Clerks bave full authority for entering all types of transactions in the registers. The registers read inventory barcodes, so transactions automatically update Cindy's perpetual inventory records. The registers issue two copies of receipts-one copy for customers and one copy for the store-in addition to recording all register actions on a register tapo. - Cindy accepts only cash or credit card payments from customers. There is one credit card machine thit sits on a counter behind the two cash registers. - Cindy uses small business accounting software for all accounting purposes. Lisa has access to the sysiem to record sales data and to prepare bank deposits. Cindy handles all other accounting functions in the system. Cindy and Lisa each have their own locked office in the back of the store. In addition, you obtain from Cindy select monthly income statement data for the past two years (see Table 1). Identify a list of fraud schemes that may be occurning at Cindy's store. Then consider what your next step would be to approach the investigation and why this is your next step. For example, TABLE 1 APPENDIX B Student Handout Cash Sales and Credit Card Sales Table 2 Cash Sales and Credit Card Sales APPENDIX C Student Handout Net Sales by Employee Table 3 Net Saies by Employee APPENDIX D Student Handout Refunds, Discounts, Voids, and "No Sale" Transactions by Employee Table 4 Figure 2 Refunds by Employee Table 5 Discounts by Employee Table 6 Vnide hu R mnlnvae Table 7