Overview
Internal controls are methods and strategies used to keep information and inventory safe from theft and to easily tell if something is compromised or missing. In this assignment, you will recommend internal controls for safeguarding inventory from an accounting perspective and explain which financial statements are affected by missing inventory.
Scenario
One of your friends has opened a new wholesale electronics business and wants your help figuring out some inventory issues they are facing. One night last week, there seemed to be fewer HD televisions in the warehouse than they expected. The last time they were in the warehouse was a week earlier, and they hadn’t noticed anything amiss.
As they looked around, they saw that the evening warehouse worker was filling the last orders of the day. The delivery driver and day warehouse worker were gone for the day, and the delivery van keys were on the desk that the warehouse workers shared. The doors to the loading dock were open, as was the door to the office area where the accountant, two customer service specialists, and the owner worked.
Knowing that you are familiar with accounting principles, they asked for your help in figuring out how to prevent this in the future.
Prompt
Based on what you have learned about internal controls, provide recommendations on what controls the business owner should put in place to prevent loss of inventory and ensure that any losses are reported immediately. Also, specify which parts of the financial statements are affected by these losses.
Specifically, you must address the following rubric criteria:
- Role of Internal Controls
Explain the role of internal controls in business settings. Also explain how not having internal controls in place may impact the accurate analysis of any wrongdoing. - Recommendations
- Recommend at least two internal controls that should be put in place to prevent inventory from going “missing,” noting any assumptions you are making about the root cause of the missing products and how your recommendations will help address them.
- Recommend at least one control that should be put in place to alert the owner if something is actually missing.
- Financial Statements
If you found that two $400 HD televisions were missing, explain which financial statements you would correct and how. Be specific as to accounts and amounts.
Guidelines for Submission
Submit a 1- to 2-page Word document with 12-point Times New Roman font, double spacing, and one-inch margins. Sources should be cited according to APA style.
| Criteria | Exemplary (100%) | Proficient (85%) | Needs Improvement (55%) | Not Evident (0%) | Value |
|---|---|---|---|---|---|
| Role of Internal Controls | Exceeds proficiency in an exceptionally clear, insightful, sophisticated, or creative manner | Explains the role of internal controls in business settings and how not having internal controls in place may impact the accurate analysis of wrongdoing | Shows progress toward proficiency, but with errors or omissions; areas for improvement may include not fully explaining how a lack of internal controls may impact the accurate analysis of wrongdoing | Does not attempt criterion | 20 |
| Recommendations | Exceeds proficiency in an exceptionally clear, insightful, sophisticated, or creative manner | Recommends at least two internal controls that should be put in place to prevent inventory from going “missing,” noting any assumptions about the root cause of the missing products and how the recommendations will help address them; recommends at least one control that should be put in place to alert the owner if something is actually missing | Shows progress toward proficiency, but with errors or omissions; areas for improvement may include recommending only one internal control to prevent inventory from going missing, not including assumptions about the root cause of the missing products and recommendations to address them, not recommending an internal control to alert the owner if something goes missing | Does not attempt criterion | 40 |
| Financial Statements | Exceeds proficiency in an exceptionally clear, insightful, sophisticated, or creative manner | Explains which financial statements would need correction and how; specifies accounts and amounts | Shows progress toward proficiency, but with errors or omissions; areas for improvement may include providing only partial explanation of some financial statements that would need correction, not specifying the correct accounts and amounts | Does not attempt criterion | 20 |
| Articulation of Response | Exceeds proficiency in an exceptionally clear, insightful, sophisticated, or creative manner | Clearly conveys meaning with correct grammar, sentence structure, and spelling, demonstrating an understanding of audience and purpose | Shows progress toward proficiency, but with errors in grammar, sentence structure, and spelling, negatively impacting readability | Submission has critical errors in grammar, sentence structure, and spelling, preventing understanding of ideas | 15 |
| Citations and Attributions | Uses citations for ideas requiring attribution, with few or no minor errors | Uses citations for ideas requiring attribution, with consistent minor errors | Uses citations for ideas requiring attribution, with major errors | Does not use citations for ideas requiring attribution | 5 |
| Total: | 100% | ||||
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