Question

Mike Lucci is the owner of Lucci Contractors, a successful small construction company. He spends most of his time out of the office supervising work at various construction sites, leaving the operation of the office to the company's cashier/bookkeeper, Gloria Smith. Gloria makes bank deposits, pays the company's bills, maintains the accounting records, and prepares monthly bank reconciliations.
Recently a friend told Mike that while he was at a party he overheard Gloria bragging that she paid for her new clothes with money from the company's cash receipts. She said her boss would never know because he never checks the cash records.
Mike admits that he does not check on Gloria's work. He now wants to know if Gloria is stealing from him. He asks you to examine the company's cash records to determine whether Gloria has stolen cash from the business and, if so, how much.
Your examination of the company's cash records reveals the following information:
1. Gloria prepared the following August 31, 2016, bank reconciliation.


2. An examination of the general ledger shows the Cash account with a balance of $18,786 on August 31, 2016.
3. The August 31 bank statement shows a balance of $16,589.
4. The August 28 deposit of $4,882 does not appear on the August 31 bank statement.
5. A comparison of canceled checks returned with the August 31 bank statement with the cash payments journal reveals the following checks as outstanding:
Check 1590 .......... $263
Check 1680 .......... 1,218
Check 1724 .......... 486
Check 1780 .......... 792
Check 1784 .......... 1,819
Check 1806 .......... 384
Prepare a bank statement using the format presented in this chapter for the month of August. Assume there were no bank or bookkeeping errors in August. Did Gloria take cash from the company? If so, how much and how did she try to conceal the theft? How can Mike improve his company’s internal controls overcash?


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  • CreatedAugust 08, 2014
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