Jones runs a family-owned department store in Ba. The store consists of nine different

departments, each with its own department manager. Store hours are Monday through

Saturday from 10:00 A.M. to 7:00 P.M., and from noon until 5:00 P.M. on Sunday.

Each department has its own cash register, and two salespersons are assigned to each

register. To prevent any confusion, each salesperson must enter his or her own secret code

with each transaction. At the end of each day, the sales manager in each department tallies

the department's register, collects the money (cash and checks) from the register, and

prepares a transmittal slip for the general manager to review and sign. The general manager

then double-checks the cash count before signing the transmittal slips.

After collecting all cash receipts from all departments, the general manager prepares a daily

cash sales report and sends it to the store's finance manager. The finance manager again

counts the money and signs three copies of the daily cash sales report. She keeps one copy

for herself, a second copy goes to the store accountant, and the last copy goes to the store

manager. The finance manager then puts all of the cash into the company safe, where it

stays until the next morning when it is picked up by an armored car service.

The store accountant reconciles copies of cash sales reports with bank deposit slips and

with credits on the monthly bank statement.

Jones has a close relationship with the bank, so he was always called first when there is

any kind of issue or problem. He just received a call from one of the bank's customer

service representatives who suggested that he look into some customer checks that had

recently bounced. The bank representative said that some of the payer names on the checks

had come up in bad checks written to a number of other local businesses.

"You have an insider working against you," said the bank employee. "This is happening

all over town; I heard a police investigator say that there's always in insider involved.

Required:

1. Discuss two possible fraud schemes in the company (5 Marks)

2. Given the store's procedures for processing cash receipts, identify which people are

in position to participate in a check fraud scheme and how they may be involved.

(7 marks)

3. Identify one internal control procedure in detail that could have eliminated the

fraud. (3 marks)