Reference no: EM132379668

Question

It is now July 2020, and Mr and Mrs Wheeler have been very successful in growing the business of Little Red Riding. The business now operates at 3 markets in the region, and employs 4 employees (Mr and Mrs Wheeler sell bicycles at one local market each week, and 2 employees are assigned to sell bicycles at the Bidgee Markets, and 2 employees are assigned to sell bicycles at the Junee markets).

Mr and Mrs Wheeler have come to you for advice, as they appear to be having problems with their inventory and/or cash receipts. They have been keeping track of inventory using the two worksheets that you showed them (in Question 1(i) above). They really like how it keeps track of inventory on hand, and they tell you how much they love not having to count inventory each and every week after the markets to see what inventory is left.

When they completed the stocktake on 30 June 2020, the closing balance of inventory in each worksheet didn't match with the actual number of small and large bicycles on hand. The worksheets showed that the closing inventory was 58 small bicycles, and 46 large bicycles. The stocktake showed that the business actually had 42 small bicycles and 30 large bicycles.

You review their inventory worksheets, and there are no errors in their worksheets... so it appears that cash takings and/or some bicycle have been stolen. You also review the three cash receipt books (one used at each of the three markets), and the amount of cash takings banked for the year was $300 less than the takings as per the cash receipt books.

Mr and Mrs Wheeler are unsure what has happened.

Required:

Undertake some research on internal controls and employee theft.

Business report on internal controls for Mr and Mrs Wheeler. In your business report:

Explain what internal controls are, and the importance of implementing internal controls to safeguard the business's assets;

Discuss the risk of employee theft, and how big of a problem employee theft is in Australia;

Explain three possible ways that employees could have stolen cash and/or bicycles from the business without Mr and Mrs Wheeler realising;

Discuss three controls/procedures that Mr and Mrs Wheeler should implement in their business to help prevent employee theft.
explain in details for above question.