For the following situations explain what you would do in the situation and iden

Question

For the following situations explain what you would do in the situation and identify two internal control problems that exist in each situation:

Suppose you have a part-time sales position over the Christmas holiday break in a small clothing store that is part of a national chain. The store’s one full-time employee, with whom you have become friendly, hired you.

Situation A:

You arrive at the store at 6 pm to take over the evening shift from the full-time employee who hired you. You notice that this person takes a coat from a rack, puts it on, and leaves by the back door. You are not sure if the coat is one that was for sale or if it belonged to the employee.

Situation B:

You are the only person in the store on a busy evening. At closing time, you total the cash register and the receipts and discover that the cash register is $20 short of cash. You consider replacing the $20 out of your pocket because you think you may have made a mistake and are afraid you might lose your job if the company thinks you took the money.

Explanation / Answer

Situation A : I would stop the employee and ask if the coat belongs to him or not saying that he might have work a different one which does not belongs to him. Or I might have to report it to the store manager if the person had already left to make such that I work in an ethical manner and perform the duties as required.

The two internal control probles that exist are-

1. Management integrity i.e. the moral character of the person with authority

2. Competent personnel which does not seem to be the case here.

Situation B : First of all, I will look into the cash register again if I have had made any mistake. If not, I will need to reconsider the decision of putting the short money from my pocket as I have not done anything wrong. It is important to inform tha manager about the inconsistency identified. This will definately not lead to losing the job as I am acting fairly.

The two internal control probles that exist are-

1. Record maintenance - It is evident that the proper documentation of business transactions are not done.

2. Competent personnel - If the error found in the cash register is correct, then the accounts manager/ book keeper is working unethically.

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