Howard Inc

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ABE

Section: 4pm
Howard Street Jewelers, Inc.
1. Identify the internal control concepts that the Levis overlooked or ignored. In the Howard Street Jewelers case, I strongly believe that Levis didn’t perform any internal control. According to the internal control concept, internal controls to work to achieve organizational objective of effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. In this case, Levis should manage better on who has the right to do what, and perform a separate of deities for all transactions. However, Levis failed to do so. She allows the cashier Betty to work on everything. According to the case, “Besides working as a part-time sales clerk, Betty handled all of the cash that came into the business and maintained the cash receipts and sales records.” Basically, this is telling us that Betty can do whatever she want with the cash that she receive from making the sales.

In this case, Betty could exclude some of the procedures or transactions. For example, when she made sales, she could exclude the recording procedure, and keep all the money from the sales in her own pocket, and Levis didn’t have the method of tracking transactions, and not able to find out what, when, where the errors are. Moreover, their system is still manually. When they try to find something, they have to look all over the place. But this is not good for internal control, because Levis do not have the right or method to know what Betty has done, and Betty is the only person knows what happen to the cash. If the system has automatic tracking record, or cash receipts, account receivable and billing, then Levis can look at the computer to figure out what is going on. Overall, if Levis had performed and apply internal control concept, she would know the problem long ago.

2. When Mrs. Levi informed the CPA of her suspicions regarding Betty, what responsibilities, if any, did the...
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