You are the auditor for Konerko’s Office supply store, which is opening for business next week. The store owner has established all the controls you have recommended for ensuring that sales are recorded properly and cash is accounted for. The owner has heard from other small business owners that employees often used returned goods as means of skimming money from the register.
a. How might an employee use returned goods to skim money from the register?
b. What controls would you recommend to prevent or detect fraudulent returns?
c. What audit procedures might you perform to detect fraudulent returns?