The Retail Fraud

The Saks Fifth Avenue case study concentrates on the human aspects of internal controls. Of note are Saks’ zero-tolerance policy of employee theft, anti-harassment policy and complaint procedure. Also, the case study highlights control activities in a major retail store. Finally, it questions what an auditor’s role is concerning employee’s work environment.

Phar-Mor was a large grocery story and had thousands of inventory items on hand at each store which processed significant amounts of cash each day. The organizational structure of Phar-Mor allowed for inadequate and fraudulent recording keeping of assets as well as authorization and approval of purchasing transactions. Phar-Mor’s IT system of event logs was not robust enough to see which transactions had been modified, deleted or created, which allowed Phar-Mor to overstate the value of inventory.

I would create loss control by having surveillance cameras both watching customer and employee actions. This includes surveillance on all cash registers and credit card machines. Also, I would inform both the customer and employee they are being watched and remind them of the potential prison punishment for any crime committed by posting signs throughout the store. For employees I would conduct thorough background checks to prevent the hiring of former high profile convicts. I would also spread the finances among various managers; I would not allow a single manager to keep track of or control the finances of any single retail

Embezzlement seems to be a white collar crime that is victimless. However, when monies are embezzled from a non profit it affects all those involved especially those benefitting from the work of the nonprofit organization. I thought of our local community nonprofit arts foundation. They not only produce a full slate of shows each season, but also provide classes in painting, sculpting, drawing, acting, music, and dance. If they were defrauded in the amount of $93,000 it would affect educational programs and community outreach.

#2. Internal Control Risks; audit planning decisions. Some internal control risks common among large, high-volume retail stores include dealing with inherent limitations and potential fraud. Even if a well-designed internal control system is in place, the employees using it are ultimately the deciding factors in its effectiveness. For example, management may instruct an employee or easily-influenced executive (of another company) to alter information or confirmations or multiple employees may conspire to steal assets or misstate records (collusion; misappropriation of assets).

With every internal control weakness a company needs to identify either a control policy or control procedure that will help prevent error or fraud from occuring in the future. Based on my suggestions as to what weaknesses existed at Goodner Brothers, Inc. I have suggested the policies or procedures that could be implemented to help prevent future issues. The internal control I would implement to hinder employee access to the accounting system would be to secure all computer programs with individual usernames and passwords to prevent access from others. The bookkeeper should be the only employee with access to the accounting system and to test this procedure the company would need to try and access the software without a username and password. To monitor the storage warehouse situation, the company should install computer scanning systems and video cameras at each location to supervize whether tires are being scanned in and out upon delivery and pick-up and to determine who and when these transactions are taking place. Semi-annual reviews should be conducted by sales managers to evaluate their sales representative. In addition, strengthening the tone at the top mentality should lie in the hands of each owner by personally reviewing all sales managers to create a top down effect.

The amount listed is the enrollment agreement was 10,020.00 which gives a difference of :

I obtained the data for this report by scouring the internet for stories and data that backed up my claim that the fraud is committed mostly between individuals and conducted a survey at a large retail store that asked the following questions:

On 04/16/2016, at approximately 1545 hours, your affiant was dispatched for a retail theft that had just occurred at Rite Aid. The caller (Christy) is employeed through Rite Aid in the lost prevention department. The employee related that he observed the theft. The actor was observed exiting the store immediately afterwards with another female and they travelled south on Main Street and then west on Oak Street.

On August 25th 2015 Co-Founder of OXYwater Preston J. Harrison and his Wife Lovena Harrison were sentenced for Wire Fraud, Money Laundering and Tax Crimes. (Investor Claims, August 2015). I chose this case because it has many different types of fraud, including wire fraud, money laundering, and tax fraud, conspiracy to commit fraud, concealment of fraud, theft and misappropriation of funds. What makes this case so interesting is that the husband and wife co-owners of OXYwater are not the only criminals. Their co-conspirator was Thomas E. Jackson;

Inherent limitations and potential fraud are a couple of internal control risks that are common among large, high-volume retail stores. Even if a well-designed internal control system is in place, the employees using it are ultimately the deciding factors in its effectiveness. The audit planning decisions should carefully plan to test internal controls for weaknesses concerning these areas.

According to Daniel F. Dooley (2008), a member of the Commercial Fraud Taskforce, financial fraud with private middle-market companies is on the rise. In fact, Mr. Dooley believes that he has seen more instances of fraud in the past two years than in the previous ten. He notes seven areas in which financial fraud has increased over the past few years:

The perfect fraud storm occurred between the years 2000 and 2002 involving two of the largest energy and telecom corporations in the United States: Enron and WorldCom. It was determined that both organizations fraudulently overstated assets, created assets from expenses or overstated revenues, costing investors billions of dollars and resulting in both organizations declaring bankruptcy (Albrecht, Albrecht, Albrecht & Zimbelman, 2012). Nine factors contributed to fraud triangle creating this perfect fraud storm, and assisting management in concealing the fraud until exposed and rectified.

A business can not work out without an account system, which includes internal. Internal controls are used by companies to make sure financial information is accurate and valid. Strong internal controls are signs of a financially healthy company and protect the company’s integrity. Strong internal controls can also increase a company’s profitability. There are several types of internal controls that companies used to protect themselves such as: Segregation of duties, asset purchases, supervisor review, internal audits and adequate documents and records. This paper will discuss several topics from a case study about And the Fraud

As Ray Burke talked about in his speech “How stores track your shopping behavior / Ray Burke / TEDx Indianapolis”, the retailers, such as the Marsh supermarkets, are analyzing the backgrounds and the family structures of the consumers which are their personal information, which may get them in a dangerous situation when these data are disclosed to the third parties such as someone with nefarious purposes and the fraud companies. If these data of the information is running without regulation and protection, it would be easy to be used by those who want to defraud the customers. The methods used by the retail industry as an undercurrent manipulation are not only gathering information through the check-out scanner but also recording videos through cameras as well as many other ways such as analyzing the search records of an individual who shop online, which may provide some malicious people with the access to the personal information. As the result, there are many people have received tons of spammers which include numerous false advertisement due to the information leaks. On the other hand, as to those VCRs, such as the videotape library of Paco Underhill, according to “The Science of Shopping” (Malcolm Gladwell), things will turn out to be terrible if these videos resource are hacked by criminals, such as the stalkers and the