Howard Street Jewelers Case Study Essay

1. The Levis all overlooked several internal control concepts that could defy prevented Bettys embezzlement from the comp whatsoever. Segregation of duties Betty had responsibilities in too m any(prenominal) areas. She maintained the interchange, the specie receipts, and the gross revenue records for Howard Street Jewelers. This not l peerless(prenominal) provided Betty with plenty of opportunity, but also gave her the marrow to conceal the theft. Authorization of transactions Betty was up to(p) to put items on layaway without authorization from management. carnal controls Cash should mystify been conciliate by management and cash shortages noted by management. The fact that the Levis were unaware of cash shortages indicates that at that place were poor somatic controls when it came to cash counts.2. In the first circumstance, in which the CPA was just now involved with the alliances valuate returns, the CPA does not see any responsibility to pursue the matter as t he CPA was not auditing the client. However, the cash shortages should behave been brought to the owners attention as soon as they were noticed. A functional relationship between an entity and the CPA is oneness of mutual trust and there would have been no harm in communicate the owners that cash shortages were occurring. In the second circumstance, in which the CPA was responsible for auditing and compiling the companys financial statements, the CPA would have to practice due diligence and suss out and gather evidence that duplicity was occurring. If this was the case, because Betty would have been discovered before her fraud equaled 350,000 dollars.3. In order to be happy at implementing internal controls, the Trubeys need an organizational structure and a control environment. I would recommend that they establish core set that they want practiced within their backup and a way that those set do-nothing be communicated to the cater daily. For instance, during training , they can polish up those ethical values and implement a way to recognize those that practice those values at least once a month. This creates an understanding amongst staff that the company places a uplifted value on ethics. The tonality internal control issues that the Trubeys will facet while owning a jewelry keep are corporeal controls, segregation of duties, and authorizations. The quintette control activities that I would recommend establish on these issues are outlined and explained down the stairs Duties should be shared amongst staff. Placing cashiers on an alternating(a) schedule between selling and cashiering splits the responsibilities and provides each(prenominal) staff appendage with the ability to esteem the work of the others. This practice can adulterate the opportunity for cash theft as it cannot be easily concealed. Even though Myrna would be head salesclerk as an owner of the business, she should also welcome staff to review her work to enforce a ashes of integrity. Transaction authorization should be required for any transaction over a certain amount deemed high risk by management. An example of this would be one sales clerk and one manager must sign the sales record to indicate that not lonesome(prenominal) the sale occurred but that it was recorded appropriately. Returns should be authorized by a member of management as well. Cash should be controlled on a daily basis. A good system for this is to audit the registry at the end of each employees shift. Any point of sale system will indicate the amount that is supposed(a) to be in the register at the time of audit. The owners should establish a indemnity of rewarding cash counts that are exact, and reprimands for cash shortages or overages in excess of xx dollars. This also eliminates the guesswork of who is responsible for any cash shortage and lets the employees know that their verity will be checked by a member of management. Deposits should be reconciled by a me mber of management. all(prenominal) restores should require two signatures verifying the accuracy of the deposit total and that it was deposited to the bank. When verifying the deposit receipts, all figures should match what was recorded, including the date. There should be physical security for neckcloth items. In the case of a jewelry store, where inventory is highly priced, it should be locked away with paints and key control should be implemented. Other physical security items would include security cameras and physical inventory counts twice a year. These basketball team internal control activities, if implemented, will project the Trubeys the opportunity to excel in their business.