91Ó°ÊÓ

Blake Gable has recently been hired as the manager of Jittery Jim's Canyon Coffee. Jittery Jim's Canyon Coffee is a national chain of franchised coffee shops. During his first month as store manager, Blake encountered the following internal control situations: a. Blake caught an employee putting a case of 100 single-serving tea bags in her car. Not wanting to create a scene, Blake 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. b. Jittery Jim's Canyon Coffee has one cash register. Prior to Blake's joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Blake made one employee on each shift responsible for taking orders and accepting the customer's payment. Other employees prepare the orders. c. Since 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. Blake expects each cashier to balance the drawer to the penny every time-no exceptions. State whether you agree or disagree with Blake's method of handling each situation and explain your answer.

Step by step solution

01

Analyzing Situation a

In situation a, Blake caught an employee attempting to steal tea bags. Instead of confronting the employee directly, he indirectly hinted at the theft, allowing the employee to return the items without further consequences. It is important to directly address theft to maintain a clear understanding of workplace policies and discourage future incidents. Not confronting the behavior directly might not prevent or deter future theft.

02

Evaluating Situation b

In situation b, Blake changed the policy so that one employee takes orders and payments, while others prepare the orders. This separation of duties is a positive internal control measure. It reduces the chance of theft or errors, as no single employee has complete control over all parts of the transaction. Thus, I agree with Blake's method here.

03

Assessing Situation c

Situation c involves having the cash register operator also responsible for balancing the cash at shift's end. While it enforces accountability, without additional checks (like a supervisor's review), this method can prevent accurate verification of cash handling errors or fraud. Ideally, another employee should verify the records to ensure proper checks and balances. Therefore, this situation could be improved with stronger checks.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Theft Prevention

Theft Prevention is a crucial aspect of running any business, and it's essential to have clear measures in place to discourage and manage theft effectively. When an employee is caught in the act of stealing, as in the case of Blake Gable catching an employee taking tea bags, it is important to address the situation directly. By merely indirectly hinting at the issue, Blake missed an opportunity to reinforce the company's zero-tolerance policy on theft. It is vital to:

• Confront the employee directly and privately to discuss the incident and the importance of honesty.
• Reiterate company policies on theft and the associated consequences.
• Document the incident and follow up with appropriate disciplinary action if necessary.

These actions not only help to prevent future theft but also show other employees that inappropriate behavior won't be tolerated. Ignoring theft or failing to address it firmly can lead to a culture where stealing is more likely to occur.

Separation of Duties

Separation of Duties is a fundamental principle in internal controls aimed at reducing the risk of errors and fraud within business processes. Blake's method of assigning specific tasks to different employees in Jittery Jim's Canyon Coffee shop is a great example of this in action. By having one employee take orders and payments and others prepare orders, there is less opportunity for one person to manipulate transactions. The benefits of this practice include:

• Increased accuracy and reliability in record-keeping, as tasks are spread among multiple people.
• Reduced risk of fraud, since it’s harder for one person to cover up theft or errors without collusion.
• More efficient workflow, as each employee can focus on mastering specific tasks.

In any business, these measures ensure that no employee has unchecked control over all stages of a transaction, thereby promoting accountability and integrity in operations.

Cash Handling Procedures

Cash Handling Procedures are essential for ensuring financial integrity and accountability in any business operation. In Blake's scenario, one employee is responsible for both operating the cash register and verifying the cash at the end of the shift. While this seems practical for accountability, it can also be problematic. If the same person handles cash throughout and then verifies it, there's a lack of independent review, which can lead to undetected errors or fraud. To improve this system, consider these steps:

• Implement a dual verification system where another employee or supervisor reviews the cash count.
• Use surprise checks or audits to ensure accuracy and honesty in cash handling.
• Integrate an electronic point of sale system to automatically log transactions and help in quick verifications.

Ensuring that strong checks and balances are in place not only fosters an environment of trust but also helps maintain the financial health of the business by catching discrepancies early on.