You were asked to investigate extreme high, unexplainedmerchandise shortages at a department store chain. You found thefollowing:
- The receiving department supervisor owns and operates aboutique carrying many of the same labels as the chain store. Thegeneral manager is unaware of the ownership interest.
- The receiving supervisor signs receiving reports showing thatthe total quantity shipped by a supplier was received and thendiverts 5% to 10 % of each shipment to the boutique.
- The store is unaware of the short shipments because thereceiving report accompanying the merchandise to the sales areasshows that everything was received.
- Accounts Payable paid vendors for the total quantity shown onthe receiving report.
- Based on the receiving department supervisor’s instructions,quantities on the receiving reports were not counted by salespersonnel.
Required:
Classify each of the five situations as a fraudulent act, afraud symptom, an internal control weakness, or an event unrelatedto the investigation. Justify your answers. (CIA Examination,adapted)
