Internal control
This query is : Resolved
26 June 2012
A company having more than 50 gold and silver jewellery stores, it encountered one fraud case by store manager.
Store manager sold jewellery of Rs. 2,00,000 in cash, when gold price was Rs. 28500, customer didn't asked for an invoice and he bought jewellery in cash payment (at that time provisions of TCS on jewellery were not there). Store manager keeps the cash with him and did not record sale transaction in the store computer system (as customer did not asked for invoice) and in the evening (same day) gold prices were fallen down substantially and after this store manager record the sale transaction in store computer system (at reduced current gold prices) and the difference of cash due to reduction in gold prices was misappropriated by store manager.
Please suggest some strong internal controls which could be effectively deployed in order to control this malpractice. (Ignore implication of TCS on cash sale of jewellery). Kindly suggest.
Store manager sold jewellery of Rs. 2,00,000 in cash, when gold price was Rs. 28500, customer didn't asked for an invoice and he bought jewellery in cash payment (at that time provisions of TCS on jewellery were not there). Store manager keeps the cash with him and did not record sale transaction in the store computer system (as customer did not asked for invoice) and in the evening (same day) gold prices were fallen down substantially and after this store manager record the sale transaction in store computer system (at reduced current gold prices) and the difference of cash due to reduction in gold prices was misappropriated by store manager.
Please suggest some strong internal controls which could be effectively deployed in order to control this malpractice. (Ignore implication of TCS on cash sale of jewellery). Kindly suggest.
26 June 2012
You should instruct all stores that they should apply rates published in a particular newspaper (Ex.Hindu) without any changes. If you see the record the rate should be as published in the newspaper. End of the day Central office should monitor the invoices raised below or above the applicable rates and ask clarification to that particular store for not applying specified rates.
All accounts should be frozen by EOD.
All accounts should be frozen by EOD.
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26 June 2012
Consider electronic lock tags for each item in the store. For sale, the e-lock has to be disengaged using the software & the scanner attached to the computer - this records the Times of the Sale. Hence one has to account the cash @ the relevant time of the sale.
Doesn't your company use an ERP?
Doesn't your company use an ERP?
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26 June 2012
Thanks to Ravi Sir and Kishore Sir for the right helping reponse.
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