Please consider the scenario below and be aware of poor internal controls over inventory.   The City of Milford Parks and Recreation Department operates three community swimming pools. Each pool has a concession stand that sells candy. Each concession stand is staffed with two workers.  To be eligible for volume discounts, the Parks and Recreation Department orders the candy for all three pools. Sandy Wells is responsible for ordering the concession stand goodies. Sandy uses a locked closet down the hall from her office at the Parks and Recreation headquarters to store the candy. She checks the closet periodically, and, when supplies seem low, she orders more.  Whenever a concession stand needs to restock inventory, a worker goes to the Parks and Recreation headquarters to get the needed candy. Because Sandy knows all of the concession workers, she usually just hands the worker the key to the candy closet so the worker can get whatever is needed. Sandy has attached a chart to the closet door to keep track of candy withdrawals. On that chart, each worker records the number of boxes of candy that he or she is taking and the pool to which it is going.  By the end of the summer, Sandy becomes worried that someone else has a key to the candy closet. The candy seems to be disappearing more quickly than it did at the beginning of the summer. For the last month or so, she hasn't found time to compare the withdrawals on her chart with candy purchases, but something just doesn’t seem right. Required: Please identify the control problems, and suggest how to correct the inappropriate inventory procedures.

Question

Please consider the scenario below and be aware of poor internal controls over inventory. 

 The City of Milford Parks and Recreation Department operates three community swimming pools. Each pool has a concession stand that sells candy. Each concession stand is staffed with two workers.

 To be eligible for volume discounts, the Parks and Recreation Department orders the candy for all three pools. Sandy Wells is responsible for ordering the concession stand goodies. Sandy uses a locked closet down the hall from her office at the Parks and Recreation headquarters to store the candy. She checks the closet periodically, and, when supplies seem low, she orders more.

 Whenever a concession stand needs to restock inventory, a worker goes to the Parks and Recreation headquarters to get the needed candy. Because Sandy knows all of the concession workers, she usually just hands the worker the key to the candy closet so the worker can get whatever is needed. Sandy has attached a chart to the closet door to keep track of candy withdrawals. On that chart, each worker records the number of boxes of candy that he or she is taking and the pool to which it is going.

 By the end of the summer, Sandy becomes worried that someone else has a key to the candy closet. The candy seems to be disappearing more quickly than it did at the beginning of the summer. For the last month or so, she hasn't found time to compare the withdrawals on her chart with candy purchases, but something just doesn’t seem right.

Required:

Please identify the control problems, and suggest how to correct the inappropriate inventory procedures.

Expert Answer

1 Rating

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Inventory costing

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Part 1: Fixed Assets Think of a business where you have worked, visited or perhaps hope to own one d...

A: Part 1: The business we are considering here is Mobile phones assembly unit. The main function of th...

Q: Vertical analysis (common-size) percentages for Cullumber Company’s sales revenue, cost of goods sol...

A:  Cullumber’s net income as a percent of sales has increased in 3 years from 4.9% to 8.7% and 15.3% i...

Q: Why aren’t transactions involving accounts payable considered to be financing activities?

A: Cash Flow Statement:   It is a financial statement prepared by a company to report their cash inflow...

Q: A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that ...

A: Salary per day = $20,000 / 10 days = $2,000 per day Accrued salary expense on December 31 = $2,000 p...

Q: In which situation does the tax depreciation allow the firms to defer paying income taxes?

A: Deferment of income tax liability is also called as Deferred Tax Liability. It means tax liability o...

Q: Note: This type of decision is similar to dropping a product line.)Birch Company normally produces a...

A: Relevant costing is used to make a decision between 2 or more alternative courses of action. In this...

Q: Your clients’ religious faith moves them to send their kids to a religious private school, and they ...

A: A charitable contribution refers to a donation or a gift which is made voluntarily to a qualified or...

Q: A documentation tool that depicts the physical flow of information relating to a particular transact...

A: option a is the correct answer

Q: Describe the conditions when contract assets and liabilities are recognized and presented in financi...

A: Contract assets: It is the right of the firm to receive payment for the goods transferred or service...