In: Accounting
Jill has recently begun working at a local florist. In addition to
creating floral arrangements, Jill spends a good deal of her time
talking to customers and ringing up sales. Over time, she
identifies a weakness in the procedures for ringing up voids. No
approval is neces- sary to void a sale, and the void slip collects
very little information about the sale. After Jill has completed a
sale and the customer has left, she voids the sale and pockets the
cash that was just received. The floral shop doesn’t miss the lost
inventory because it has a high inventory turnover ratio and high
losses due to flowers losing their bloom.
1. What type of fraud is Jill committing?
2. What could the florist do to prevent this type of fraud from occurring?
1. What type of fraud is Jill committing?
Answer: Jill is committing theft of cash through fraudulent disbursements because Jill is making a distribution of company funds for a dishonest purpose. Jill is using his position for disbursing funds with a false device/trick for an inappropriate purpose.
2. What could the florist do to prevent this type of fraud from occurring?
Answer: The florist should require that a receipt is attached and information about the sale/void be collected, including the name of the salesperson, the reason for the void, and possibly a customer signature. The florist might also want to consider limiting who can complete voids rather than allowing any employee to do so. To detect any patterns or inappropriate voids the florist should collect more information about voids. It will help florist to track who is completing voids, how often, and possibly detect any patterns or inappropriate voids. Also florist should also document how much inventory is lost due to spoilage, thus develop an effective method for managing inventory.