Key internal control issues

3. Assume that you have a small CPA firm and have been contacted by a husband and wife, John and Myrna Trubey, who are in the final stages of negotiating to purchase a local jewelry store. John will prepare jewelry settings, size jewelry for customers, and perform related tasks, while Myrna will be the head salesclerk. The Trubeys intend to retain four of the current employees of the jewelry store-two salesclerks, a cashier, and a college student who cleans the store, runs errands, and does various other odd jobs. They inform you that the average inventory of the jewelry store is $100,000 and that annual sales average $400,000, 30 percent of which occur in the six weeks prior to Christmas. The Trubeys are interested in retaining you as their accountant should they purchase the store. They know little about accounting and have no prior experience
as business owners. They would require assistance in establishing an accounting system, monthly financial statements for internal use, annual financial statements to be submitted to their banker, and all necessary tax returns. John and Myrna are particularly concerned with control issues, given the dollar value of inventory that will be on hand in the store and the significant
amount of cash that will be processed daily. You see this as an excellent opportunity to acquire a good client. However, you have not had a chance to prepare for your meeting with the Trubeys because they came in without an appointment. You do not want to ask them to come back later, since that may encourage them to check out your competitor across the street.

Required: Provide the Trubeys with an overview of the key internal control issues they will face in operating a jewelry store. In your overview, identify at least five control activities you believe they should implement if they acquire the store. You have never had a jewelry store as a client but you have several small retail clients. Attempt to impress the Trubeys with your understanding of internal control issues for small retail businesses.