Suzette Washington financed her college education by working as an inventory cle

Question

Suzette Washington financed her college education by working as an inventory clerk for Bertolini’s, a clothing store chain located in the southeastern United States. Bertolini’s caters primarily to fashion-conscious young men and women. The com­pany’s stores carry a wide range of clothing, including casual wear, business suits, and accessories. The Bertolini’s store for which Suzette worked is located a few blocks from the campus of the large state university that she attended. Except for management personnel, most of Bertolini’s employees are college students. Suzette’s best friend and roommate, Paula Kaye, worked for Bertolini’s as a sales clerk. Paula majored in marketing, while Suzette was an accounting major.

During Suzette’s senior year in college, Bertolini’s began experiencing abnormally high inventory shrinkage in the store’s three departments that stocked men’s apparel. Suzette’s supervisor, an assistant store manager, confided in her that he believed one or more of the sales clerks were stealing merchandise. Over lunch one day in the student union, Suzette casually mentioned the inventory problem to Paula. Paula quickly changed the subject by asking Suzette about her plans for the weekend.

“Paula, rewind for just a second. Do you know something that I don't?”

“Huh? What do you mean?”

“Missing inventory . . . shrinkage . . . theft?”

After a few awkward moments, Paula stopped eating and looked squarely into her friend’s eyes. “Suzette, I don't know if it’s true, but I’ve heard a rumor that Alex and Matt are stealing a few things each week. Polo shirts, silk ties, jeans. Occasionally, they take something expensive, like a hand-knit sweater or sports jacket.”

“How are they doing it?”

“I’ve heard - and don’t repeat any of this now – I’ve heard that a couple of times per week, Alex stashes one or two items at the bottom of the trash container beneath the number two cash register. Then Matt, you know he empties the trash every night in the dumpster out in the alley, takes the items out and puts them in his car.”

“Paula, we can’t let them get away with this. We have to tell someone.”

“No we don't. Remember, this is just a rumor. I don’t know that it’s true. If you tell a manager, there will be questions And more questions. Maybe the police will be brought in. You know that eventually someone’s going to find out who told. And then . . . slashed tires . . . phone calls in the middle of the night.”

“So, don’t get involved? Don’t do anything? Just let those guys keep stealing?”

“Suze, you work in inventory. You know the markup they put on those clothes. They expect to lose a few things here and there to employees.”

“Maybe the markup wouldn’t be so high if theft wasn’t such a problem.”

Now, there was no doubt in Paula’s mind that Suzette was going to report the alleged theft scheme to management. “Two months, Suze. Two months till we gradu­ate. Can you wait till then to spill the beans? Then we can move out of state before our cars are spray-painted.”

One week following the conversation between Suzette and Paula conversation, a Bertolini’s store manager received an anonymous typed message that set forth the alleged two-person theft ring rumored to be operating within the store.

Questions

1. What is the appropriate course of investigative action for the Bertolini’s store manager?

2. Briefly discuss internal control activities that might have prevented the apparent theft losses occurring at Bertolini’s.

Explanation / Answer

As the management already have noticed the high level shrinkage of inventory , its I very necessary to have a proper investigation regarding the same. The new message from anonymous side also increase the doubt on their employees regarding the chance of theft of material ( clothes) from the company. There can be two possibilities for conducting the investigation 1. Internal 2. Proper investigation by complaining to police.

Internal investigation can be done with the help of security staffs and other managers by giving more attention to the inventory shrinking day of week. Night patrolling kind of surveillance system can be done to identify the culprits. The necessity of internal investigation is mainly because most of the workers are students, so in order to give them warning or sent them out from organisation without making it as a legal punishment.

External investigation will be one by police team after registering complaint. They will question each and every employees and will focus more on those who work on dispatch and inventory side. One to one interrogative sessions followed by deep dive analysis of root cause will help them to identify the culprits. In this case the convict will get legal punishment based on the value of goods and intensity of case.

     Some important control activities that can be proposed from company sides are

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