Question

Faith Cassen has recently been hired as the manager of Gibraltar Coffee Shop. Gibraltar Coffee Shop is a national chain of franchised coffee shops. During her first month as store manager, Faith encountered the following internal control situations:
a. Faith caught an employee putting a case of 1,000 single-serving tea bags in his car. Not wanting to create a scene, Faith smiled and said, "I don’t think you’re putting those tea bags on the right shelf. Don't they belong inside the coffee shop?" The employee returned the tea bags to the stockroom.
I _______with Faith's method of handling this situation because she has _______the internal control principle of safeguarding of assets.
b. Gibraltar Coffee Shop has one cash register. Prior to Faith’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Faith made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders.
I _________with Faith's method of handling this situation because Faith has ______the internal control principle of assignment of responsibility and ______the internal control principle of segregation of duties.
c. Because only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches the amount of cash sales recorded by the cash register. Faith expects each cashier to balance the drawer to the penny every time—no exceptions.
I_______with Faith's method of handling this situation because Faith has ______the internal control principle of segregation of duties.

Answer 1

Answer:

a.       I Disagree with Faith's method of handling this situation because she has not followed the internal control principle of safeguarding of assets. Stealing is a serious issue. An employee who can justify taking a box of tea bags can probably justify “borrowing” cash from the cash register.

b.      I Agree with Faith's method of handling this situation because Faith has followed the internal control principle of assignment of responsibility by making one employee responsible for the cash drawer and followed the internal control principle of segregation of duties (preparing the orders) from the accounting (taking orders and payments).

c.       I disagree with Faith's method of handling this situation because Faith has not followed the internal control principle of segregation of duties. It is true that faith has made one employee responsible however after cash counting another employee or Faith himself remove the cash register tape and compare the balance with cash drawer for effective internal control. Also, Faith’s standard of no mistakes may encourage the cashiers to overcharge a few customers in order to cover any possible shortages in the cash drawer.