Elegance by Elaine is a retail store specializing in womens clothing. The store has established a liberal
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Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible.
This year, returns at Elegance by Elaine have reached an all-time high. There are a large number of returns under $50 without receipts.
a. How can sales clerks employed at Elegance by Elaine use the store’s return policy to steal money from the cash register?
b. What internal control weaknesses do you see in the return policy that make cash thefts easier?
c. Would issuing a store credit in place of a cash refund for all merchandise returned without a receipt reduce the possibility of theft? List some advantages and disadvantages of issuing a store credit in place of cash refund.
d. Assume that Elegance by Elaine is committed to the current policy of issuing cash refunds without a receipt. What changes could be made in the store’s procedures regarding customer refunds in order to improve internal control?
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Related Book For
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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