Troberg Case Study

Troberg Case Study

Troberg Stores Case Study

1. A business’s internal control process should address its need to comply with relevant state and federal statutes. Internal control is an integral component of an organization. It is management's job to maintain an effective control system that provides reasonable, but not absolute assurance for effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. According to the EPPA act employers are required by law to post notices summarizing the protections of the act in workplace areas. If certain laws and regulations such as the EPPA Act are required to be posted in workplaces areas then management’s internal control process need to comply with applicable laws and regulations. In order to stay compliant with relevant laws and regulations management can consult an advisor.

2. Below are policies and procedures used by stores to maintain control over checkout stand operations and the control object:

a) Provide a receipt for every transaction. Encourage customers to expect a receipt by posting signs at each register.

i) This ensures that the cashier is not over charging the customers.

ii) The cashier is handing them back the exact change due. A cashier might hand the customer less change back and at the end of the day pocket the money that his/her draw is over by.

b) Put one employee in charge of setting up cash drawers. Have another double- check the cash count.

i) This control is to make sure the cashier is responsible for his/her draw at the end of the shift. If you give a cashier a draw with $100 and they agree it has the same amount then at the end of their shift they should have $100 plus the cash sales in the draw. Any less is the cashier’s error. If this trend continues one should look into it as a possibility of theft is possible.

c) Each employee is responsible for his/her own cash drawer. No other employee should at any time (during lunch, breaks, etc.) be allowed to open or use another's cash drawer. At the end of each shift each cash drawer should be balanced by the employee and double- checked by another.

i) This makes sure that the cashier is responsible for his/her draw at the end of the shift. Also helps agreeing to the cash total at the end of the shift when two people are counting it. This eliminates any discrepancies or errors in cash counting. Also makes the individual wholly responsible for his/her draw and liable for any errors or shortage of cash.

d) Cash register drawer is closed after each transaction. Register is locked at all times.

i) Closing the drawer after each transaction ensures that the money is placed in the register and reduces the likelihood of an error or theft.

ii) Locking the register limits who can access the register. Usually the cashier and a supervisor are the only ones with access to the cashier’s register.

e) Identify each over-ring and under-ring. Managers sign off all voids and over-rings.

i) A cashier might hand the customer less change back and at the end of the day pocket the money that his/her draw is over by.

f) Limited amount of accumulated cash in the register.

i) Use a drop-safe. This reduces the likelihood of losing a lot of cash in case of a robbery. Safe-drops prevent large sums of money being accumulated in the drawers.

g) Check cash-to-sale ratios.

i) These, along with unusually frequent refund transactions, can indicate employee theft.

h) Check for counterfeit currency

i) The look of the paper and its "feel" are usually the most obvious signs. A common counterfeiting practice is to "cut corners" off or use a checking marker.

3. Duties that typically should be segregated or separated across employees of a small business are the custody of assets, authorization or approval or related transactions, record keeping of related transactions, and execution of the transaction activity. Management should cross-train employees to segregate incompatible duties to prevent fraud.

Four main categories that should be segregated:

* Authorization

* Custody

* Record Keeping

* Reconciliation

If adequate segregation of duties is not economically feasible for small businesses than businesses should at least separate custody of assets from the record keeping. This means the person who receives and records receipts should not generate invoices and reconcile receivables. For small businesses, owners should be more involved in business operations.