Reference no: EM132698589

A medium-sized, family-owned business operates as both a distributor and a retailer. This business distributes widgets to independent retailers, as well as operating its own retail outlets. Last year, the business suffered a loss of an estimated $1 million dollars in inventory. Several factors played into the inventory theft, including poor internal controls, a lack of timely accounting records, and difficulty in measuring and tracking inventory items.

• The theft was perpetrated by several long-time employees over the course of several months. A portion of the inventory was delivered to one of the company's customers and a portion of the inventory was redirected and sold for cash which was split among the accomplices. One of the employees involved was responsible for recording inventory shipments. Misappropriated deliveries were shown as delivered to the company-owned retail outlets. As a matter of company procedure, the company only invoices its regular customers. Company-owned retail outlets are not invoiced upon delivery of inventory. Inventory was not reconciled or monitored for the company-owned retail outlets which enabled the misappropriated inventory to be removed from inventory records without detection.

Problem 1: Identify and describe the following:

1. a measure that could have prevented the theft
2. a measure that could have detected the theft
3. a step to take once fraud is suspected.