The elements of internal control are very important in business due to the passage of the Sarbanes Oxley Act. Internal controls involve protection of a company’s assets. In this Discussion, you will look at cash controls, bank reconciliations, and special cash funds.
This week’s Discussion focuses on Activity 5-3 located on page 209 of your textbook, which reads as follows:
The following is an excerpt from a conversation between the store manager of La Food Grocery Stores, Amy Locke, and Steve Meyer, president of LaFood Grocery Stores.
Steve: Amy, I’m concerned about this new scanning system.
Amy: What’s the problem?
Steve: Well, how do we know the clerks are ringing up all the merchandise?
Amy: That’s one of the strong points about the system. The scanner automatically rings up each item, based on its bar code. We update the prices daily, so we’re sure that the sale is rung up for the right price.
Steve: That’s not my concern. What keeps a clerk from pretending to scan items and then simply not charging his friends? If his friends were buying 10-15 items, it would be easy for the clerk to pass through several items with his finger over the bar code or just pass the merchandise through the scanner with the wrong side showing. It would look normal for anyone observing. In the old days, we at least could hear the cash register ringing up each sale.
Amy: I see your point.
Suggest ways that La Food Grocery Stores could prevent or detect the theft of merchandise as described.