1 . The Levis forgotten several inner control principles that could possess prevented Betty’s embezzlement from your company. • Segregation of duties: Betty had obligations in a lot of areas. The girl maintained the amount, the cash invoices, and the revenue records intended for Howard Avenue Jewelers. This not only provided Betty with plenty of opportunity, nevertheless also offered her the means to cover up the fraud. • Consent of orders: Betty could put products on layaway without consent from supervision. • Physical controls: Funds should have recently been reconciled by management and cash shortages noted simply by management.
The truth that the Levis were unaware of cash disadvantages indicates that there were poor physical handles when it came to cash counts.
2 . In the initially circumstance, in which the CPA was simply associated with the company’s tax returns, the CERTIFIED PUBLIC ACCOUNTANT does not include any responsibility to follow the matter because the CERTIFIED PUBLIC ACCOUNTANT was not auditing the client. However , the cash shortages should have recently been brought to the owner’s focus as soon as they were noticed.
A working romantic relationship between an entity plus the CPA can be one of common trust and there might have been simply no harm in informing the owners that cash shortages were happening. In the second circumstance, in which the CPA was responsible for auditing and compiling the company’s economic statements, the CPA would need to practice due diligence and research and accumulate evidence that fraud was occurring. If perhaps this was the truth, then Betty would have recently been discovered just before her scams equaled three hundred and fifty, 000 dollars.
3. In order to be successful at implementing interior controls, the Trubeys need an organizational structure and a control environment. I would suggest that they set up core beliefs that they wish practiced inside their business and a way those values can be communicated towards the staff daily. For instance, during training, they will review those ethical values and put into action a way to acknowledge those that practice those beliefs at least once per month. This produces an understanding between staff the company spots a high worth on integrity. The key inside control problems that the Trubeys will face while buying a jewelry store are physical regulates, segregation of duties, and authorizations. The five control activities that I would recommend depending on these issues happen to be outlined and explained listed below: • Tasks should be shared amongst personnel. Placing certified on an alternating schedule between selling and cashiering splits the duties and provides each staff member web-site and get assess the work of the other folks. This practice can decrease the opportunity for cash theft as it cannot be very easily concealed. Although Myrna will be head salesclerk as a great owner of the business, she should also welcome staff to examine her operate to enforce a system of integrity.
• Transaction authorization should be required for any transaction over a specific amount deemed danger by supervision. An example of this may be one revenue clerk and one administrator must signal the revenue record to indicate that not only the sale happened but it turned out recorded appropriately. Returns needs to be authorized by a member of supervision as well. • Cash ought to be controlled on a regular basis. A good program for this is usually to audit the register by the end of each employee’s shift. Virtually any point of sale system will reveal the amount that is certainly supposed to be in the register during audit. The owners should certainly establish a coverage of worthwhile cash counts that are specific, and reprimands for funds shortages or overages around twenty dollars. This kind of also eliminates the complexities of who is responsible for virtually any cash scarcity and allows the employees be aware that their accuracy will be inspected by a person in management.
• Deposits should be reconciled with a member of management. All build up should require two autographs verifying the accuracy in the deposit total and that it had been deposited towards the bank. When verifying the deposit statements, all figures should match what was registered, including the particular date. • There should be physical to safeguard inventory things. In the case of a jewelry store, in which inventory is extremely priced, it must be locked apart with secrets and important control must be implemented. Different physical protection items will include security cameras and physical inventory counts twice a year. These five internal control activities, in the event that implemented, can give the Trubeys the opportunity to excel in their organization.
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