2) Sherry\'s Fashions is a retail store specializing in women\'s clothing. The s

Question

2) Sherry's Fashions is a retail store specializing in women's clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under S100. If the item is more than S100, a check is mailed to the customer Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store anager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible. This year, returns at Sherry's Fashions reached an all-time high. There are a large number of returns under $100 without receipts. a. How can sales clerks employed at Sherrys Fashions use the store's return policy to steal moncy from the cash register? MCQ Options: A) By not issuing a refund but restocking the merchandise B) They can'tC) By writing phony refunds and cketing cash b. What internal control weaknesses do you see in the return policy that make cash thefts easier? MCo Options: A) Only 1 employee has custody of valuable assets B) They have component personnel, rotating duties, and mandatory vacations C) There is too much separation of r related operations D Operations is separate from accounting c. All of the following are advantages of issuing a store credit rather than a cash refund except: MCQ Options: A) The possibility of stealing cash is reduced B) The overall level of returns/exchanges may be reduced C) The company is less likely to experience a cash drain during the weeks immediately following the holiday D) Store credits will keep clerks from committing fraud d. All of the following are changes that Shery's Fashions could make to improve the internal controls for issuing cash refunds without a receipt except: MCQ Options: A) Get a supervisor's authorization for a refund prior to giving it to customer B) Use secruity measures like camera to monitor cash removed without customer present C) Assign an employee from another shift to restock returned merchandise and reconcile refunds D) Give customers choice of cash refunds or exchange credits

Explanation / Answer

A. The answer is option A I.e, by not issuing a refund but restocking the merchandise.

B. The appropriate answer will be option A I.e only one person(store clerk) has the custody of valuable assets.

C. The answer is option C I.e, the company is less likely to experience a cash drain during the weeks immediately following the holiday.

D. The correct answer is option D I.e,give customers choice of cash refunds or exchange credits.

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