Assignment: Internal Control Project
The purpose of this project is to develop a better understanding of internal control through considering a scenario based on an actual case of misappropriation of assets. Answer all of the requirements below based on the following facts of the case. Be sure to properly cite any sources you use in completing the requirements. (1,200 words)
Surprising Returns at All-American Grocery Markets
Bill Smith worked as a clerk at the customer service counter of an All-American Grocery Markets (AAGM) store in suburban Chicago, Illinois. AAGM is a major chain of grocery stores with over 2,500 locations across the US and has been a publicly held company for 75 years. In November 2021, Bill was working long hours processing returns of goods from AAGM customers. However, in addition to actual customer return transactions, Bill was also crediting a number of fictitious transactions to several of his own credit cards. In a two-week period during the month, Bill processed 50 phony transactions which totaled $890,000, and spent a significant amount of the stolen funds on luxury purchases including several expensive new vehicles. When the fraud was finally discovered by AAGM in early January 2022, store personnel blamed the occurrence of this fraud on a key reviewer of return transactions being off-work due to an illness during those two weeks of November 2021. During its fiscal year ended December 31, 2021, AAGM's total sales revenue and net income were $129,400 million and $2,550 million, respectively.
Task
a. How would a retail store like AAGM differ from other types of companies in handling sales returns?
b. Would the fraud described above indicate a material weakness in ICFR for AAGM? Why or why not?
c. Assume that AAGM wants to implement a new system for handling in-store customer returns and that you are a consultant who has been engaged by the audit committee of AAGM to do so. In a brief memo (no more than 2 pages) addressed to the chair of AAGM's audit committee, describe the internal control policies and procedures that AAGM should put in place to help ensure that this type of fraud does not happen again.
Format your assignment according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.