Hold storeroom employees responsible for all inventory losses. 4 Alterations to physical inventory counts and perpetual inventory records Unauthorized access to inventory Limit physical and logical access to the records. inventory records to authorized employees. Require that all adjustments to inventory records be approved by a responsible official. Fraud Examine physical inventory counts and perpetual inventory records for evidence of fraud Terminate any employees that commit fraud 5 Many customer refunds and credits. Collusion customers, salespersons, Segregate duties so refunds and credits are common carriers, and the shipping and authorized by responsible employees not accounting departments of Covington. otherwise involved in sales, shipping, or maintaining accounts receivable. Poor product quality Fix production problems 6 Many original documents are missing or lost. However, there are substitute copies of all missing originals. Failure to use pre-numbered documents. Use pre-numbered documents to facilitate the control and identification of documents. Fraud was perpetrated, original copies of Investigate all instances where originals are the documents were destroyed, and they missing and photocopies are used. were replaced by photocopies. 7 An unexplained decrease in the gross profit percentage has occurred. Granting unauthorized discounts or Require the approval of a responsible party credits to customers. before granting customer discounts or credits. Theft of inventory
Hold storeroom employees responsible for all inventory losses. 4 Alterations to physical inventory counts and perpetual inventory records Unauthorized access to inventory records. Fraud Limit physical and logical access to the inventory records to authorized employees. Require that all adjustments to inventory records be approved by a responsible official. Examine physical inventory counts and perpetual inventory records for evidence of fraud Terminate any employees that commit fraud 5 Many customer refunds and credits. Collusion customers, salespersons, common carriers, and the shipping and accounting departments of Covington. Poor product quality Segregate duties so refunds and credits are authorized by responsible employees not otherwise involved in sales, shipping, or maintaining accounts receivable. Fix production problems 6 Many original documents are missing or lost. However, there are substitute copies of all missing originals. Failure to use pre-numbered documents. Fraud was perpetrated, original copies of the documents were destroyed, and they were replaced by photocopies. Use pre-numbered documents to facilitate the control and identification of documents. Investigate all instances where originals are missing and photocopies are used. 7 An unexplained decrease in the gross profit percentage has occurred. Granting unauthorized discounts or credits to customers. Theft of inventory Require the approval of a responsible party before granting customer discounts or credits.
rais12_SM_CH07.docx