Galviston Supply Company is an auto parts supplier. At the end of each month, the employee who maintains all of the inventory records takes a physical inventory of the firm’s stock. When discrepancies occur between the recorded inventory and the physical count, the employee changes the physical count to agree with the records.
1. What problems could arise as a result of Galviston Supply Company’s inventory procedures?
2. How could the internal control system be strengthened to eliminate the potential problems?