Ethics discussion: Internal controls, Sarbanes-Oxley Act

Please respond to this discussion question using the information from this lesson.
The prompt for this week’s Ethics Lesson Discussion comes from the Special Activity SA 8-4 on page 389 of your text.

Pete Harsh and Sara Alper are both cash register clerks for Farmers' Markets. Gina Majed is the store manager for Farmers' Markets. The following is an excerpt of a conversation between Pete and Sara:

Pete: Sara, how long have you been working for Farmers' Markets?Sara: Almost five years this July. You just started two weeks ago ... right?Pete: Yes. Do you mind if I ask you a question? Sara: No, go ahead.Pete: What I want to know is, have they always had this rule that if your cash register is short at the end of the day, you have to make up the shortage out of your own pocket?Sara: Yes, as long as I've been working here.Pete: Well, it's the pits. Last week I had to pay in almost $50.Sara: It's not that big a deal. I just make sure that I'm not short at the end of the day.Pete: How do you do that?Sara: I just short-change a few customers early in the day. There are a few jerks that deserve it anyway. Most of the time, their attention is elsewhere and they don't think to check their change.Pete: What happens if you're over at the end of the day?Sara: Majed lets me keep it as long as it doesn't get to be too large. I've not been short in over a year. I usually clear about $50 to $80 extra per day.

Discuss this case from the viewpoint of proper controls and professional behavior.

http://kucourses.com/ec/crs/default.learn?CourseID=3073466&Survey=1&47=4849309&ClientNodeID=404340&coursenav=2&bhcp=1

My response: 28 Aug 08 2:07 PM MST


Farmers Markets as a company or business needs to review all its business practices whether they are a small business with one location or many locations. If these sorts of actions are going on by the employee’s as well as the managers then the company does not have internal control procedures in place and functioning. As stated in our text, the objectives of internal control are to provide reasonable assurance that (1) assets are safeguarded and used for business purposes, (2) business information is accurate, and (3) employees comply with laws and regulations. (Warren, Reeve, and Duchac. P. 350) As also emphasized in our text that a business’s control environment is in the attitude of the management and the employees understanding about the importance of internal control procedures.

This management was not upholding this importance to the employee by allowing the employee to “keep” the overage that the employee had at the end of the day. This is sending the message to the employee we allow fraud in this company “have at it!” The Human recourses department obviously did not translate the company personnel policies effectively. The management did not have a proper training with the employee, and the company is obviously not having “surprise” visits to ensure compliance.

One area this business needs to really address would be in the internal control procedures and that is hiring competent personnel that have the proper management training for the position. For proper control of cash receipts it is important that the manager and the employee count the ending shift cash drawer, it must balance with the opening shift cash drawer plus shift sales. It is not stated in this discussion if this process happens it just states that the manager encourages the employee to take what ever is “over.”

The accounting department should also see a red flag when there are only “cash short” and never any cash “over.” Seems there might be many area’s for fraud within this company in various departments! This would absolutely be for personal gain and it in fact fraud and theft and should be disciplined by what ever agencies would be involved.Warren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.