Howard Street Jewellers

Howard Street Jewellers - Boris Bernstein 20252771 Howard...

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Boris Bernstein 20252771 Howard Street Jewellers, Inc. Case 1. Identify the internal control concepts that the Levis overlooked or ignored. First, the Levis ignored the internal control concept of segregation of duties. The segregation of duties concept limits the responsibilities of each employee. It forbids the same employee from being responsible for a transaction from the beginning to the end. The Levis entrusted Betty with too many responsibilities that were interrelated, increasing the risk of potential fraud; and should have been performed by more than one employee. Betty handled the entire revenue cycle by herself, handling the cash register, maintaining the cash receipts and sales records. Second, the Levis overlooked the concept that no one person should perform more than one of the following: recording transactions, authorizing transactions, and maintaining custody over assets. The Levis allowed Betty to do all three processes. Betty handled the jewellery sales, placing items in layaway, recording the sales, maintaining cash receipts and depositing the cash in the register. 2. When Mrs. Levi informed the CPA of her suspicions regarding Betty, what responsibilities, if any, did the CPA have to pursue this matter? Alternatively, assume that in addition to preparing tax returns for Howard Street Jewellers, the CPA (a) audited the business’s annual financial statements, (b) reviewed the annual financial statements, and (c) compiled annual financial statements. The CPA served as the jewellery store’s accountant for almost 40 years and has been providing them with a wide range of accounting and business matters. The responsibility that the CPA has to pursue this matter is dependent on the time of this fraud relating to what services were provided by the CPA. It is also dependent on what services the CPA is providing now. Assuming the CPA was only providing tax return services, as he is doing now, then the CPA does not have responsibility to pursue this matter. If the CPA is performing a full audit, review, or compilation tasks; he has further responsibilities to
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This note was uploaded on 11/23/2009 for the course AFM 480 taught by Professor Gb during the Spring '09 term at Waterloo.

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Howard Street Jewellers - Boris Bernstein 20252771 Howard...

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