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You were asked to investigate extreme high, unexplained merchandise shortages at a department store chain. You found the following: The receiving department supervisor owns and
You were asked to investigate extreme high, unexplained merchandise shortages at a department store chain. You found the following:
- The receiving department supervisor owns and operates a boutique carrying many of the same labels as the chain store. The general manager is unaware of the ownership interest.
- The receiving supervisor signs receiving reports showing that the total quantity shipped by a supplier was received and then diverts 5% to 10 % of each shipment to the boutique.
- The store is unaware of the short shipments because the receiving report accompanying the merchandise to the sales areas shows that everything was received.
- Accounts Payable paid vendors for the total quantity shown on the receiving report.
- Based on the receiving department supervisors instructions, quantities on the receiving reports were not counted by sales personnel.
Required:
Classify each of the five situations as a fraudulent act, a fraud symptom, an internal control weakness, or an event unrelated to the investigation. Justify your answers. (CIA Examination, adapted)
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