Howard Street Jewelers Case Study Essay

1. The Levis overlooked several(prenominal) intragroup swan concepts that could reserve prevented Bettys embezzlement from the company. Segregation of duties Betty had responsibilities in as well as many aras. She maintained the funds, the change receipts, and the gross cut-rate sales volumes for Howard Street Jewelers. This not only provided Betty with sight of prospect, but alike gave her the means to hold the theft. Authorization of transactions Betty was able to put items on laya way of life without authorization from attention. Physical suss outs specie should have been reconciled by circumspection and cash shortages noted by management. The accompaniment that the Levis were unaware of cash shortages indicates that there were woeful forcible controls when it came to cash counts.2. In the start circumstance, in which the certified public accountant was simply regard with the companys tax returns, the certified public accountant does not have any respons ibility to pursue the matter as the certified public accountant was not auditing the client. However, the cash shortages should have been brought to the owners attention as currently as they were noticed. A take a craping family relationship between an entity and the CPA is unrivaled of vulgar trust and there would have been no harm in informing 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 physical exertion due diligence and investigate and forgather evidence that fraud was occurring. If this was the geek, then Betty would have been discovered before her fraud equaled 350,000 dollars.3. In order to be successful at implementing cozy controls, the Trubeys need an organizational construction and a control environment. I would preach that they establish core values that they pauperization practiced within their business and a w ay that those values can be communicated to the staff daily. For instance, during training, they can check up on those effective values and implement a way to recognize those that practice those values at least once a month. This creates an accord amongst staff that the company places a mellowed value on ethics. The key internal control issues that the Trubeys bequeath face sequence owning a jewelry store are physical controls, segregation of duties, and authorizations. The five control activities that I would recommend based on these issues are outlined and explained below Duties should be shared amongst staff. Placing cashiers on an alternating muniment between selling and cashiering splits the responsibilities andprovides each staff member with the ability to assess the work of the others. This practice can reduce the chance 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 arrangement of integrity. Transaction authorization should be c exclusively for for any transaction over a certain amount deemed high risk of infection by management. An example of this would be one sales clerk and one manager must sign the sales record to indicate that not only the sale occurred but that it was recorded appropriately. Returns should be clear by a member of management as well. Cash should be controlled on a daily basis. A good system for this is to audit the register at the end of each employees shift. all point of sale system go away indicate the amount that is supposed to be in the register at the time of audit. The owners should establish a policy of recognise cash counts that are exact, and reprimands for cash shortages or overages in excess of twenty dollars. This also eliminates the guesswork of who is responsible for any cash shortage and lets the employees know that their accuracy will be checked by a member of management. Deposits should be reconciled by a member of management. All clings should want 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 protective cover for roll items. In the case of a jewelry store, where inventory is exceedingly priced, it should be locked away with keys and key control should be implemented. Other physical security items would include security cameras and physical inventory counts twice a year. These five internal control activities, if implemented, will give the Trubeys the opportunity to excel in their business.