Question

a) Jason Philber, a swindler, sent several businesses invoices requesting payment for office supplies
that had never been ordered or delivered to the businesses. A 5 percent discount was offered
for prompt payment. What internal control procedures should prevent this swindle from being
successful? Discuss.

b)

The cashier for Downtown Cafeteria is located at the end of the food line. After customers have
selected their food items, the cashier rings up the prices of the food and the customer pays the
bill. The customer line frequently stalls while the person paying searches for the correct amount
of cash. To speed things up, the cashier often collects money from the next customer or two who
have the correct change without ringing up their food on the register. After the first customer fi-
nally pays, the cashier rings up the amounts for the customers who have already paid. What is the
internal control weakness in this procedure? How might the internal control over the collection of
cash from the cafeteria customers be strengthened?

Answer 1

a. Following measures must be taken to prevent this swindle from being successful:

1. Mere presentation of invoice must be no ground to make payments. It must accompany the SRV no. and a copy of same. Here SRV means Store Receipt Voucher or a similar document.
2. Check for the discrepancies regarding quantity and quality of the materials, as reported (in writing) by the stores department.
3. No invoice must be cleared before it has been verified with the corresponding purchase order earlier issued by us.
4. Before releasing payment, our gate-keeping records must pass on the information of date and time as to when the invoiced materials entered in our premises.
5. Accounts department must ensure all checks and balances done before the payment of any invoices is released.

b.  Suggested measures for improving the internal control over the collection of cash from the cafeteria customers:

1. To the extent possible, also try to deploy card-payment machines, through which any amount of any small fraction can be easily paid by the customers.
2. Also, to the extent possible, try to price the beverages etc. in round figures (say in multiple of 10 or 5), so that customers don't have to struggle much for the change.
3. Allow, or even suggest two or three customers to pay their bills combined. This will solve the problem of customers' line stalling to great extent.
4. Ensure enough availability of change with the cashier. Why bother the customers for change every time? We are supposed to serve them.
5. Cashier must keep loose chocolates or other small price items ready with him. If customers don't mind, return the change in candies.
6. Put a big signboard on cashier counter saying, "Bringing right change help us serve you faster".