Case 3.6 Burnello’s Ristorante 1. Identify internal control weaknesses evident in Buranello’s operations. What risks are posed by these internal control problems? a. Too many people have access to the register. This makes pointing responsibility and guilt harder. This makes culprits harder to find. b. Management only counts the register each day and has variances then. This makes the entire day’s events impossible to detect when an event occurred that would cause a shortage. c. The reconciliation page doesn’t have a comments section. This could help identify why misstatements are occurring. d. The morning management recounts the amount and brings the money to the bank seemingly alone. This gives opportunities for theft like the sting idea Barnes had.
2. For each internal control weakness you listed in responding to the previous question, identify a measure that Buranello’s could implement to remedy that weakness. Indicate whether these measures would be cost effective. a. Putting passwords on the registers and reducing access to personnel would be easy but possibly expensive to add a security program to the computer. However, the register should already have a password system to prevent people who aren’t workers from accessing the register. Therefore it should be easy and cost effective to implement. All it would require would be stricter management. b. Management could count the draw each time there is a shift change. This is easily inexpensive to implement. Designating a register per worker using it helps identify who is responsible for the draw. But this would still require implementing my first control. c. Adding a comment section and beginning use of it would be easy to add and inexpensive as well. d. Using a coworker witness to sign off the count of the drawer could help prevent this. It may be time consuming but this is usually implemented in most businesses I have worked for that required use of a register.
The behavioral aspect mainly focuses on people and culture, of which are means of managing the activities and behavior that cause costs. "The Seven Cs Model" is used to manage the cost-generating activities. The seven Cs are: culture, champion, change process, commitment, controls, compensation, and continuous education as illustrated in the exhibit below. Culture. "Corporate culture is the ...
3. Prepare a list of internal control procedures for a restaurant other than the controls referred to in this case. For each control that you list, identify its underlying objective. a. When I worked in Wendy’s, in order to delete something of a large dollar amount from a transaction, a manger’s authorization was needed. This helped to keep workers from having too much power over the transaction and helping to prevent stealing or altering of the amount that should be present in the register. b. Another of my jobs, we had to input a password each time we wanted to create a transaction. This helps to not only prevent other workers from altering the amount in the register from who was supposed to, but it also identifies who was using the register. Also, the cashier would not be the one to reconcile the drawer after the night was over. c. Any management overrides of a register had to be confirmed with the cashier on duty and explained for the reason. This helped to prevent management from stealing since another witness was aware of the instance.
4. Do you believe that Barnes’s plan to test Aaron O’Neil’s honesty was appropriate? Was it ethical? What ethical responsibilities does a business’s senior management or owner have when an employee is suspected of theft? I don’t believe Barnes’s plan was appropriate or ethical. I believe his situation was very much an entrapment scheme. When management suspects an employee, they need proof. If this means keeping a closer eye or implementing tighter controls, then that is what is necessary.