Madonna Epstein has recently been hired as the manager of Beans Coffee Shop. Beans Coffee Shop is a national chain

Madonna Epstein has recently been hired as the manager of Beans Coffee Shop. Beans Coffee Shop is a national chain of franchised coffee shops. During her first month as store manager, Madonna encountered the following internal control situations:

a. Beans Coffee Shop has one cash register. Prior to Madonna’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Madonna made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders.

b. Since only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches
the amount of cash sales recorded by the cash register. Madonna expects each cashier to balance the drawer to the penny every time—no exceptions.

c. Madonna caught an employee putting a case of 500 single-serving tea bags in her car. Not wanting to create a scene, Madonna smiled and said, “I don’t think you’re putting those tea bags on the right shelf. Don’t they belong inside the coffee shop?” The employee returned the tea bags to the stockroom.


State whether you agree or disagree with Madonna’s method of handling each situation and explain your answer.


Answer:
a. Agree. Madonna has made one employee responsible for the cash drawer in accordance with the internal control principle of assignment of responsibility. In addition, Madonna has segregated the operations (preparing the orders) from the accounting (taking orders and payments).

b. Disagree. It is commendable that Madonna has given the employee a specific responsibility and is holding that employee accountable for it. However, after the cashier has counted the cash, another employee (or perhaps Madonna) should remove the cash register tape and compare the amount on the tape with the cash in the drawer. Also, Madonna’s standard of no mistakes may encourage the cashiers to overcharge a few customers in order to cover any possible shortages in the cash drawer.

c. Disagree. Stealing is a serious issue. An employee who can justify taking a box of tea bags can probably justify “borrowing” cash from the cash register.