Troberg stores

COMPANY BACKGROUND

 Kirby Jackson is a stocker, the lowest employment position, with Trobergs Sixth Street store in his hometown. Troberg store is a chain of small grocery stores located in a cluster of small towns in northern Minnesota. Fifteen years later, Kirby had risen to the position of assistant-store manager.

Troberg Store

JACK-OFALL-TRADE

 Although technically a management position, Kirbys job required him to be a jack-of-alltrades for the Sixth Street store. He worked as a stocker and checker when needed, prepared purchase orders for three departments, closed the store several days per week, and trained new employees.

 Kirby was a quiet and introverted individual who was known for his punctuality and work ethic. Coworkers always called Kirby first if they needed someone to fill in for them.

$200

$200
$200
OWNER OF TROBERG STORES

$200
STORE MANAGER

 For Trobergs Sixth Street Store, cash shortages had been a recurring problem. Over the previous 12 months, Angelo Velloti, the store manager, had reported four cash shortages, each exceeding $200, to the owner of Troberg Stores, Elliot Paulsen.

REQUIRED

$2,000

 Increasing competition from nationwide grocery chains had been slicing away at Trobergs revenues and profits for several years. By the spring of 1995, Trobergs gross profit percentage hovered at at an anemic 10 percent, meaning that the Sixth Street store needed to produce @2,000 of revenue to replace the gross profit lost due to a $200 theft. The gross profit percentage for comparable grocery chains ranged from 18 to 25 percent.

OPERATING BUDGET

 At the same time Paulsen, the owner, was demanding that Velloti eliminate the Sixth Street stores theft losses, he was slashing the stores operating budget. During the past year, Velotti had trimmed the stores payroll from 30 to 24 employees, reducing the stores staff during each work shift and assigning more job responsibilities to each employee through which he realized that this provides dishonest subordinates a greater opportunity to take advantage of the business. But when he tried to make that argument to Paulsen, the owner refused to listen.

MAJOR PROCESS

 The major process inherent in the case problem is the Revenue Cycle particularly sales and cash receipts.

STEPS IN THE PROCESS

 The Sixth Street store had four checkout stands. During the day, the stores three fulltime cashiers staffed checkout stands one through three. Kirby, the two other assistant store managers, the produce manager, and the dairy manager served as relief checkers. Relief checkers typically manned register four.

ONE AFTERNOON IN EARLY MAY 1995.

AFTER 30 MINUTES

$210

 Violet Rahal, the cashier assigned to register 3, had taken her lunch break a few minutes earlier at 1 pm. When she came back 30 minutes later, she noticed that several items at her work station had been rearranged. She was told by Roma, a coworker assigned at register two, that Kirby had checked out several customers at her register when she was away. Violet then counted her cash till and counted it again. Each time, she arrived at the same total her cash till was short by $210. She immediately reported the shortage to Velloti, the store manager.

INTERNAL CONTROL ISSUES

Supervision
Some firms just like Troberg have too few employees to achieve an adequate separation of functions

These firms must rely on supervision as a form of compensating control

By closely supervising employees who perform potentially incompatible functions, a firm can compensate for this exposure.

Segregation of duties
Segregating duties ensures that no single individual or department processes a transaction in its entirety The transaction authorization should be separate from transaction processing.

Asset custody should be separate from the task of asset record keeping.

The organization should be structured so that the perpetration of a fraud requires collusion between two or more individuals

Access Controls
It prevents and
detects unauthorized and illegal access to the firms assets and information.

Accounting records
Audit trail By following the audit trail, management can discover where an error or fraud occurred

ASSERTIONS VIOLATED

Occurrence

Accuracy

Completeness

RECOMMENDATION

Giving trust and confidence to one person is not a bad thing.

It is advised that every other break of each cash registrar, they will record the total of their cash till along with his/her signature and their supervisor or manager.

Person without authority or is not assigned to a specific job should not have access to that certain transaction or task.