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Control procedures that prevent/detect the theft of cash

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The following is an excerpt from a conversation between two sales clerks, Tracy Rawlin and Jeff Weimer. Both Tracy and Jeff are employed by Magnum Electronics, a locally owned and operated electronics retail store.

Tracy: Did you hear the news?
Jeff: What news?
Tracy: Bridget and Ken were both arrested this morning.
Jeff: What? Arrested? You're putting me on!
Tracy: No, really! The police arrested them first thing this morning. Put them in handcuffs, read them their rights— the whole works. It was unreal!
Jeff: What did they do?
Tracy: Well, apparently they were filling out merchandise refund forms for fictitious customers and then taking the cash.
Jeff: I guess I never thought of that. How did they catch them?
Tracy: The store manager noticed that returns were twice that of last year and seemed to be increasing. When he confronted Bridget, she became flustered and admitted to taking the cash, apparently over $ 15,000 in just three months. They're going over the last six months' transactions to try to determine how much Ken stole. He apparently started stealing first.

Suggest appropriate control procedures that would have prevented or detected the theft of cash.

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Solution Summary

The answer to this problem explains systems that may be put in place to ensure the security of cash. The references related to the answer are also included.

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The first control procedure that would have prevented or detected the theft of cash is that the same person cannot receive goods returned and pay cash for it. This is separation of responsibility. Specifically it means that one employee should be in charge of goods returned, she would ask the customer to fill the merchandise refund form, receive the goods from her and then ask the customer to give the signed merchandise refund form to the cashier for payment.
In addition to separation of duty, the control procedure for goods returned is getting approval. ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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