Compulsory (Wajib) for Accounting Class A-B-C
Jane Houston opens a shoe store and hire two employees. She also ask you, a public accountant, to prepare financial statements for her at the and of each month. You agree but suggest that she needs an adequate internal control structure to make the venture success. She tells you that internal controls are not critical to the operations of a very small firm, such as the shoe store. Also, she replies that she cannot afford more costly outlays and that she does not want to offend the two employees with elaborates precautions. She says her employees are family-oriented, ethical, and honest and therefore would not steal from the the firm.
- Explain to Jane why a sound internal control structure is a critical to a very small firm as it would be for a much larger firm
- Present the response you would offer to her argument that controls would be too costly
- Present the response you would offer to her other argument that her employees would not steal from the firm
- Point out the difficulties in establishing an effective internal control structure in her shoe store
- Would you recommend the she formally implement all five internal control structure? Explain
Post your answer in this web “Leave a Comment” menu at the latest 4th June 2011. You can answer in English or Bahasa Indonesia, however, answering in English would be an additional point.
This case study is taken from:
Wilkinson, J.W., Cerullo, M.J., Raval, V., and Wong-On-Wing, B. 2000. Accounting Information Systems: Essential Concepts and Applications. Fourth Edition. John Wiley and Sons, Inc. USA