Internal Controls Ramona\'s Clothing is a retail store specializing in women\'s

Question

Internal Controls Ramona's Clothing is a retail store specializing in women's clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is mailed to the customer. Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible. This year, returns at Ramona's Clothing have reached an all-time high. There are a large number of returns under $75 without receipts a. How can sales clerks employed at Ramona's Clothing use the store's return policy to steal money from the cash register? 3 b. What internal control weaknesses do you see in the return policy that make cash thefts easier? c. Would issuing a store credit in place of a cash refund for all merchandise returned without a receipt reduce the possibility of theft? Classify the following as either advantages or disadvantages of issuing a store credit in place of cash A clerk could only issue a phony store credit rather than taking money from the cash register. The store would lose less revenue if customers had to choose other store merchandise instead of getting a cash refund

Explanation / Answer

a. Sales clerk employed at Ramona’s clothing can steal the small items priced below $75 and they can easily give those to their friends who in turn can return them to store without receipts and claim refund – which can be shared by them

b. Return without receipt and in cash – is the control weakness which makes the policy to endulge in cash thefts easier

c. Yes, issuing a store credit in place of cash refund will reduce the possibility of theft

The following are as follows:

d. Customer identification can be ensured through or the date of purchase can be written on the product or some unique mark – which can be used to identify when and to whom the product was sold - this control can improve the procedure followed

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.