Assignment: Internal Controls
One of your friends has opened a new wholesale electronics business and wants your help figuring out some inventory issues they are facing.
One night last week, there seemed to be fewer HD televisions in the warehouse than they expected. The last time they were in the warehouse was a week earlier, and they hadn't noticed anything amiss. As they looked around, they saw that the evening warehouse worker was filling the last orders of the day. The delivery driver and day warehouse worker were gone for the day, and the delivery van keys were on the desk that the warehouse workers shared. The doors to the loading dock were open, as was the door to the office area where the accountant, two customer service specialists, and the owner worked.
Knowing that you are familiar with accounting principles, they asked for your help in figuring out how to prevent this in the future.
Specifically, you must address the following criteria:
1) Role of Internal Controls?- Explain the role of internal controls in business settings. Also explain how not having internal controls in place may impact the accurate analysis of any wrongdoing.
2) Recommendations
a) Recommend at least two internal controls that should be put in place to prevent inventory from going "missing," noting any assumptions you are making about the root cause of the missing products and how your recommendations will help address them.
b) Recommend at least one control that should be put in place to alert the owner if something is actually missing.
3) Financial Statements?If you found that two $400 HD televisions were missing, explain which financial statements you would correct and how. Be specific as to accounts and amounts.