Fresh Subs is a deli that sells fresh subs, soups, and salads. Fresh Subs was founded by
Question:
Fresh Subs is a deli that sells fresh subs, soups, and salads. Fresh Subs was founded by Jenny and Jason, who are brother and sister, and began as a small, local deli in Calgary. Based on rave reviews of their subs, Jenny and Jason have decided to expand operations within Alberta. As part of the expansion plans, all of the assets were rolled over into a newly formed corporation that has a fiscal year-end of December 31, 2018. During their first year of operations, Jenny and Jason decided to hire Lento & Lento LLP (L&L) to help develop accounting policies that are consistent with ASPE for various new transactions. You, a senior accountant with L&L, successfully completed the engagement. Jenny and Jason have now returned to Lento & Lento seeking help with internal controls. The Company has experienced significant growth, with multiple locations, and can no longer be managed in an owneroperator manner. Specifically, Jenny and Jason have asked you to provide them with the control procedures around the following areas:
1. Fresh Subs recently implemented a new customer loyalty program. Each customer receives 1 Sub Club point for every large sub that they purchase. A customer receives a free large sub once they earn 10 Sub Club points. Jenny and Jason would like to have adequate controls to ensure that points are only being issued when a customer purchases a sub, and that cards are being redeemed when 10 points have been earned. Currently, there are little to no controls over this process. The employees have a stamp, and stamp a card at the time of purchase.
2. Fresh Subs has had an issue controlling inventory. Jenny and Jason are concerned about unaccounted inventory shrinkage, and damages as the total inventory units purchased is always greater than the total units sold. Currently, there are no controls over the inventory aside from the annual comparison of sub costs versus sub sales.
3. As is the issue with most fast food restaurants, cash based sales are highly susceptible to theft. For example, Jenny had caught an employee making a sub, collecting cash from the customer, and pocketing the cash (as opposed to putting into the cash register). Currently, there are no controls specific to dealing with cash based sales.
Required: The partner has asked you to prepare a memo (maximum of three pages) that addresses the clients control concerns. The following format may be useful to articulate the control procedures: (Pleases help me out!!! There is three big issues!)
Expert Answer:
1 Customer Loyalty program A currently has a customer loyalty programme in which the customer receives a stamp for each major sub purchase The consumer receives a complimentary large sub after collect... View the full answer
