Reference no: EM132466858

Suzette Washington financed her college education by working as an inventory clerk for Bertolini's, a clothing store chain located in the southeastern United States.1 Bertolini's caters primarily to fashion-conscious young men and women. The company's stores carry a wide range of clothing, including casual wear, business suits, and accessories. The Bertolini's store for which Suzette worked is located a few blocks from the campus of the large state university that she attended. Except for management personnel, most of Bertolini's employees are college students. Suzette's best friend and roommate, Paula Kaye, worked for Bertolini's as a sales clerk. Paula majored in marketing, while Suzette was an accounting major.

• During Suzette's senior year in college, Bertolini's began experiencing abnormally high inventory shrinkage in the store's three departments that stocked men's apparel. Suzette's supervisor, an assistant store manager, confided in her that he believed one or more of the sales clerks were stealing merchandise. Over lunch one day in the student union, Suzette casually mentioned the inventory problem to Paula. Paula quickly changed the subject by asking Suzette about her plans for the weekend. "Paula, rewind for just a second. Do you know something that I don't?" "Huh? What do you mean?" "Missing inventory . . . shrinkage . . . theft?" After a few awkward moments, Paula stopped eating and looked squarely into her friend's eyes. "Suzette, I don't know if it's true, but I've heard a rumor that Alex and Matt are stealing a few things each week. Polo shirts, silk ties, jeans. Occasionally, they take something expensive, like a hand-knit sweater or sports jacket." "How are they doing it?" "I've heard-and don't repeat any of this now-I've heard that a couple of times per week, Alex stashes one or two items at the bottom of the trash container beneath the number two cash register. Then Matt, you know he empties the trash every night in the dumpster out in the alley, takes the items out and puts them in his car." "Paula, we can't let them get away with this. We have to tell someone." "No 'we' don't. Remember, this is just a rumor. I don't know that it's true. If you tell a manager, there will be questions. And more questions. Maybe the police will be brought in. You know that eventually someone's going to find out who told. And then . . .

• slashed tires . . . phone calls in the middle of the night." "So, don't get involved? Don't do anything? Just let those guys keep stealing?" "Suze, you work in inventory. You know the markup they put on those clothes. They expect to lose a few things here and there to employees." "Maybe the markup wouldn't be so high if theft wasn't such a problem." Now, there was no doubt in Paula's mind that Suzette was going to report the alleged theft scheme to management. "Two months, Suze. Two months till we graduate. Can you wait till then to spill the beans? Then we can move out of state before our cars are spray-painted."

Point 1. This case was developed from information provided by a former college student who is now a CPA. The names, location, and certain other background facts have been changed.

One week following Suzette and Paula's conversation, a Bertolini's store manager received an anonymous typed message that revealed the two-person theft ring rumored to be operating within the store. Bertolini's immediately retained a private detective. Over a four-week period, the detective documented $500 of merchandise thefts by Alex and Matt. After Bertolini's notified the police, the local district attorney filed criminal charges against the two young men. A plea bargain agreement arranged by their attorneys resulted in suspended prison sentences for Alex and Matt. The terms of that agreement included making restitution to Bertolini's, completing several hundred hours of community service, and a lengthy period of probation.

Questions

Question 1. What would you do if you found yourself in a situation similar to that faced by Suzette in this case?

Question 2. Do you believe that it was appropriate for Suzette to report the alleged theft ring to a store manager? Would it have been unethical for Suzette not to report the rumored theft ring?

Question 3. Accounting majors are preparing to enter a profession recognized as having one of the strongest and most rigorously enforced ethical codes. Given this fact, do you believe that accounting majors have a greater responsibility than other business majors to behave ethically?

Question 4. Briefly discuss internal control activities that might have prevented the theft losses suffered by Bertolini's