Problem 2 - Accounting

Question

Deana Crisman works at the drive-through window of Awesome Burgers. Occasionally, when a drive-through customer orders, Deana fills the order and pockets the customer's money. She does not ring up the order on the cash register. 1\. Identify the internal control weaknesses that exist at Awesome Burgers, and discuss what can be done to prevent this theft.

Step-by-Step Solution

Answer

Implement a POS system, conduct regular audits, and educate staff to ensure all transactions are recorded and discrepancies addressed.

Step 1: Identify the Procedures in Place

Review the current internal control procedures at Awesome Burgers. This involves understanding how orders and sales are recorded and who has access to the cash register and inventory.

Step 2: Assess the Weaknesses

Identify the critical weakness: Deana is able to handle transactions without documentation. This is a lack of accountability and oversight at the point of sale.

Step 3: Implement Preventive Measures

To prevent such occurrences, insist on using the cash register for every transaction. Use a digital point-of-sale (POS) system that logs every order before it is fulfilled and paid for, ensuring that all sales are recorded.

Step 4: Strengthen Enforcement and Monitoring

Introduce regular audits and shift reconciliations. Compare cash totals with the register records and inventory levels to ensure consistency, with discrepancies being flagged for review.

Step 5: Enhance Staff Training and Awareness

Educate the staff on the importance of using the POS system for every transaction and implement consequences for those who violate these policies to deter theft.

Key Concepts

Point-of-Sale (POS) Systems

Points of Sale (POS) systems are crucial in maintaining accurate financial records in a business. In the restaurant industry, such as at Awesome Burgers, a POS system can monitor all transactions and ensure that orders are properly logged. This helps in tracking sales data, managing inventory, and providing accurate reports.

A good POS system helps in several ways:

• Ensures that every order is recorded before it is filled, which prevents discrepancies.
• Links transactions to specific employees, ensuring accountability.
• Provides real-time data tracking, enhancing the management's ability to make informed decisions.

Introducing a digital POS system at Awesome Burgers can address internal control issues by ensuring that no transaction is completed without being logged. This system will help prevent situations like Deana's from occurring by requiring every transaction to be entered in the system.

Cash Register Procedures

Strict cash register procedures are essential for the financial health of a business. At Awesome Burgers, lax cash register procedures allowed Deana to pocket cash without recording sales. To combat this, implementing a standard operating procedure can be highly beneficial.

Some effective cash register procedures include:

• All sales should be rung up in the cash register before the order is filled.
• Access to the register should be limited to authorized personnel only.
• Regular reconciliations should be conducted, matching cash in the register with recorded sales.

These procedures help ensure that all transactions are legitimate and prevent discrepancies between cash and recorded sales. Ensuring strict adherence to these procedures helps to maintain accountability across staff and keep financial practices tight and secure.

Employee Training and Accountability

Well-trained employees are critical for maintaining efficient and secure transactions. Employee training creates a culture of accountability. At Awesome Burgers, implementing comprehensive training sessions can educate employees on their roles in the context of internal control.

Training programs should focus on:

• Proper use and handling of POS systems.
• The importance of recording each transaction accurately.
• The consequences of not following procedures, including potential disciplinary actions.

When employees are aware of the expectations and potential repercussions, they are more likely to comply with organizational policies. Accountability improves as all staff understand their responsibilities, reducing potential fraud and errors.

Fraud Prevention Measures

Fraud prevention is a critical component of internal control systems. Awesome Burgers faces issues like theft due to its weak controls. To counteract this, introducing measures specifically aimed at preventing fraud is essential.

Effective fraud prevention can include:

• Regular audits and spot checks to ensure compliance with procedures.
• Encouraging an open-door policy for reporting suspicious activities without fear of reprisal.
• Rotating shifts and changing duties to avoid opportunities for collusion.

By taking proactive steps in preventing fraud, businesses like Awesome Burgers can protect themselves from financial losses and improve the overall trust within their team. Not only do these measures secure finances, but they also cultivate a culture of integrity and transparency.