Snake Creek Company has one trusted employee who, as the owner said, handles all of the book-keeping and paperwork for the company. This employee is responsible for counting, verifying, and recording cash receipts and payments, making the weekly bank deposit, preparing checks for major expenditures ( signed by the owner), making small expenditures from the cash register for daily expenses, and collecting accounts receivable. The owners asked the local bank for a $ 20,000 loan. The bank asked that an audit be performed covering the year just ended. The independent auditor ( a local CPA), in a private conference with the owner, presented some evidence of the following activities of the trusted employee during the past year:
a. Cash sales sometimes were not entered in the cash register, and the trusted employee pocketed approximately $ 50 per month.
b. Cash taken from the cash register ( and pocketed by the trusted employee) was replaced with expense memos with fictitious signatures ( approximately $ 12 per day).
c. $ 300 collected on an account receivable from a valued out- of- town customer was pocketed by the trusted employee and was covered by making a $ 300 entry as a debit to Sales Returns and a credit to Accounts Receivable.
d. $ 800 collected on an account receivable from a local customer was pocketed by the trusted employee and was covered by making an $ 800 entry as a debit to Sales Discounts and a credit to Accounts Receivable.
Required: 1. What was the approximate amount stolen during the past year?
2. What would be your recommendations to the owner?