Sergio Flores works at the drive-through window of Big & Bad Burgers. Occasionally, when a drive-through customer orders, Sergio fills the order and pockets the customer's money. He does not ring up the order on the cash register.

Question

Identify the internal control weaknesses that exist at Big & Bad Burgers.

Can customers be part of the internal control process?

Answer 1

There are several internal control weaknesses present at Big & Bad Burgers based on the scenario you provided:

Internal Control Weaknesses:

1. Lack of Cash Register Controls:

   • Sergio is able to pocket money without ringing up the order, indicating a lack of oversight on cash register operations. This suggests insufficient controls over cash handling and transaction recording.

2. Inadequate Segregation of Duties:

   • There appears to be a failure in the segregation of duties, where one individual (Sergio) is responsible for both taking orders and handling cash. Ideally, different individuals should be responsible for these processes to reduce the risk of theft.

3. Insufficient Supervisory Oversight:

   • If Sergio can operate the drive-through without anyone noticing, it suggests a lack of managerial supervision or monitoring of transactions. Regular audits, unannounced cash counts, or monitoring of employee behaviors could help detect such issues.

4. No Surveillance or Monitoring Systems:

   • The absence of video surveillance at the drive-through window could allow employees to engage in dishonest activities without being recorded or observed.

5. Failure to Reconcile Cash Drawer:

   • If there is no procedure for regularly reconciling the cash drawer with sales records, discrepancies caused by theft may go unnoticed for a long time.

6. Lack of Customer Receipts:

   • If customers are not provided with a receipt in all circumstances, it becomes difficult for them to contest charges or report suspicious behavior, providing an opportunity for employees to go unchallenged.

Can Customers Be Part of the Internal Control Process?

Yes, customers can play a role in the internal control process, albeit indirectly:

1. Encouraging Receipt Requests:

   • Customers can be educated to always ask for a receipt, which serves as a record of their transaction and acts as a deterrent to employee theft.

2. Reporting Irregularities:

   • Well-informed customers can report any suspicious behavior or discrepancies they notice, such as being charged incorrectly or not receiving a receipt.

3. Satisfaction Surveys and Feedback:

   • Customer feedback can highlight issues with service or discrepancies in orders, which can alert management to potential fraudulent activities.

4. Promotion of Transparent Practices:

   • If a business publicly commits to transparency and ethical practices, it creates an environment where deceptive behaviors are less tolerated, and customers might be more vigilant.

While customers alone cannot enforce internal controls, their involvement can enhance the accountability of staff and contribute to a more robust control environment.