E8-13 – Identifying and correcting an internal control weakness
Lane & Goble Bookstore has a liberal return policy. A customer can return any product for a full refund within 30 days of purchase. When a customer returns merchandise, Lane & Goble policy specifies:
• Store clerk issues a prenumbered return slip and refunds cash from the cash register. Keep a copy of the return slip for review by the manager.
• Store clerk places the returned goods back on the shelf as soon as possible. Lane & Goble uses a perpetual inventory system.
1. How can a dishonest store clerk steal from Lane & Goble? What part of company policy enables the store clerk to steal without getting caught?
2. How can Lane & Goble improve its internal controls to prevent this theft?
Click here for the solution: Lane & Goble Bookstore has a liberal return policy
