Please help me.Internal control
recommendations
What internal control procedures would you recommend in each of the following situations?
1. A concession company has one employee who sells T-shirts and sunglasses at the beach. Each
day, the employee is given enough shirts and sunglasses to last through the day and enough cash
to make change. The money is kept in a box at the stand.
2. An antique store has one employee who is given cash and sent to garage sales each weekend. The
employee pays cash for this merchandise that the antique store resells.
An antique store has one employee who is given cash and sent to garage sales each weekend. The employee pays cash for any merchandise acquired that the antique store resells.
1. Internal control recommendations for the concession company:
- Implement a system to track the inventory of T-shirts and sunglasses, such as using a sales register or a logbook to keep a record of the items that are given to the employee at the beginning of each day and the items returned at the end of the day. This will help identify any discrepancies or potential theft.
- Require the employee to count and document the cash received at the start of the day and also at the end of the day when closing the stand. This will help ensure that the money collected matches the sales made and can detect any possible misappropriation.
- Store the cash in a safe or a locked cash register rather than a box, minimizing the risk of theft.
- Implement regular audits of the cash and inventory by a separate employee or manager to cross-check the records against the actual count, ensuring accuracy and detecting any irregularities.
2. Internal control recommendations for the antique store:
- Establish a clear purchasing process where all purchases made by the employee are properly documented and authorized. This can include using purchase orders, receipts, or a logbook to record the details of each transaction, such as the date, item description, purchase price, and name of the seller.
- Implement a review and approval process for each transaction, where a manager or owner verifies and signs off on the purchases made by the employee. This will help ensure that the expenses are legitimate and prevent any unauthorized or fraudulent purchases.
- Conduct periodic reconciliations of the purchases made by the employee with the sales made by the store. This can be done by comparing the sales records of the sold items with the inventory records of the purchased items, verifying that all items purchased have been properly accounted for and sold.
- Monitor and analyze profit margins, particularly for the items purchased by the employee. This can help identify any discrepancies or suspicious pricing patterns that may indicate fraud or unethical behavior.
- Implement segregation of duties by having a separate employee handle the cash and handle the inventory. This minimizes the risk of collusion and helps to ensure proper checks and balances.