Reference no: EM132469184

problem 1: Yorkshire Bike Shop has a liberal return policy. A customer can return any product for a full refund within 14 days of purchase. When a customer returns merchandise, Yorkshire policy specifies the following:

• Store clerk issues a prenumbered return slip, refunds cash from the cash register, and keeps a copy of the return slip for review by the manager.
• Store clerk places the returned goods back on the shelf or on the floor as soon as possible.
• Yorkshire uses a periodic inventory system.

Required

Question 1: How can a dishonest store clerk steal from Yorkshire? What part of company policy enables the store clerk to steal without getting caught?

Question 2: How can Yorkshire improve its internal controls to prevent this theft?

problem 2:

• Jonathan Todd Schwartz was a CPA who worked for GSO Business Management LLC. He was sent to prison for six years for embezzling millions of dollars from celebrities, including the Canadian singer-songwriter Alanis Morissette. Schwartz withdrew funds by reporting them as cash expenses and personally handled the cash. Client bank statements were sent to GSO, where he modified the information and then sent out financial statements to his clients.

Question 1: What internal control weaknesses at GSO Business Management LLC allowed this to happen? How could the losses have been avoided?

required:

• Correcting an internal control weakness