Danny Deck, the director of internal auditing for Rice Department Stores, was working in his office one Thursday when Chris McMurray, president of the company, burst in to tell Deck about a problem. According to McMurray, “Customer complaints about delays in getting credit for merchandise returns are driving Sally Godwin up the wall! She doesn’t know what to do because she has no control over the processing of credit memos.”
Godwin is the manager in charge of customer relations and tries to keep everybody happy. Upon her recommendation, the company had adopted an advertising motto: “ Satisfaction Guaranteed and Prompt Credit When You Change Your Mind.” The motto is featured in newspaper ads and on large banners in each store.
Deck performed a preliminary review and found the following:
1. Godwin believes customers will be satisfied if they receive a refund check or notice of credit on account within five working days.
2. The chief accountant described the credit memo processing procedure as follows: When a customer returns merchandise, the sales clerks give a smile, a “returned merchandise receipt,” and a promise to send a check or a notice within five days. The store copy of the receipt and the merchandise are sent to the purchasing department, where buyers examine the merchandise for quality or damage to decide whether to put it back on the shelves, return it to the vendor, or hold it for the annual rummage sale. The buyers then prepare a brief report and send it with the returned merchandise receipt to the customer relations department for approval. The buyer’s report is filed for reference and the receipt, marked for approval in Godwin’s department, is sent to the accounting department. The accounting department sorts the receipts in numerical order, checking the numerical sequence, and files them in preparation for the weekly batch processing of transactions other than sales and cash receipts, both of which are processed daily. When the customer has requested a cash refund, the checks and canceled returned merchandise receipts are approved by the treasurer, who signs and mails the check. When the credit is on a customer’s charge account, it is shown on the next monthly statement sent to the customer.
3. The processing in each department takes two or three days.

Required:
a. Analyze the problem. How much time does it take the company to process the merchant dise returns?
b. Formulate a recommendation to solve the problem. Write a brief report explaining your recommendation.