Private Fitness Llc

I.Background/ Issue

Private Fitness, LLC is a small health club located at Rancho Palos Verdes, California. The owner, Rosemary Worth, a former finalist in the Ms. Fitness USA competition, decided to open this health club to increase her standard for living. However, she found out a recent theft case in her business which was done by the manager/ instructor and a long-time friend, Kate Hoffman. Her primary tasks included marketing, facility up-keep, scheduling of appointments, and record keeping.

II.Problem

What should be the process or controls that Rosemary could utilize to protect her business’s assets and to ensure that her business received all the revenues to which it was entitled without being on-site at all times herself?

III.Point of View

The existing employee fraud in the company done by Kate means that the internal control of the company is not effective to completely guard the revenue and assets of the company. Furthermore, there was no proper delegation of duties wherein Kate acted multiple incompatible duties like authorizing a transaction, receiving and maintaining custody of the asset that resulted from the transaction hence, she successfully perpetrate and conceal errors or fraud in the normal course of their duties.

IV.Alternative Courses of Action

Alternatives Advantages Disadvantages

1.Rosemary should fire Kate and hire one of the other instructors to become a manager. No need for new employees hence, less salaries/ commission expense.

The same incident might happen.

Not enough internal control.

2.Rosemary should fire Kate and hire a non-instructor to become a manager. Prevent employee fraud. Not enough instructors to attend the sessions

3.Rosemary should keep Kate as an instructor only and hire a professional suitable for managerial position with the knowledge to make a new system. Prevent employee fraud.

Strengthen company’s internal control.

Remain friends with Kate. 

V.Areas To consider

I.Background/ Issue

Private Fitness, LLC is a small health club located at Rancho Palos Verdes, California. The owner, Rosemary Worth, a former finalist in the Ms. Fitness USA competition, decided to open this health club to increase her standard for living. However, she found out a recent theft case in her business which was done by the manager/ instructor and a long-time friend, Kate Hoffman. Her primary tasks included marketing, facility up-keep, scheduling