LO 1.3 PB1-3 Identifying and Resolving Ethical Dilemmas When some people think a
ID: 338973 • Letter: L
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LO 1.3 PB1-3 Identifying and Resolving Ethical Dilemmas When some people think about inventory theft, they imagine a shoplifter running out of a store with goods stuffed inside a jacket or bag. But that's not what the managers at the Famous Footwear store on Chicago's Madison Street were dealing with. Their own employees were the ones stealing the inventory. One scam involved dishonest cashiers who would let their friends take a pair of Skechers without paying for them. To make it look like the shoes had been bought, cashiers would ring up a sale, but instead of charging $50 for shoes, they would charge only $2 for a bottle of shoe polish. When the company's managers saw a drop in gross profit, they decided to put the accounting system to work. In just two years, the company cut its Madison Street inventory losses in half. Here's how a newspaper described the store's Retailers Crack Down on Employee Theft SouthCoast Today, September 10, 2000, Chicago By Calmetta Coleman, Wall Street Journal Staff Writer Famous Footwear installed a chainwide register-monitoring system to sniff out suspicious transactions, such as unusually large numbers of refunds or voids, or repeated sales of cheap goods. B Jefore an employee can issue a cash refund, a second worker must be present to see the customer and inspect the merchandise. [T]be chain has set up a toll-free hotline for employees to use to report suspicions about co-workers. These improvements in inventory control came as welcome news for investors and creditors of Brown Shoe Company, the company that owns Famous Footwear Required: 1. Explain how the register-monitoring system would allow Famous Footwear to cut down on employee theft 2. Think of and describe at least four different parties that are harmed by the type of inventory theft described in this caseExplanation / Answer
1. The cash monitoring system records every transaction and store the informaiton about the transaction which can be matched with appropriate camera recording one by one. It also includes a wireless ID system that denies access to cash register if any unauthorised person tries to do so. It can also identify such activities and help to track down the guilty. By cash register monitoring, any suspicious transction can be analysed for its authenticity.
2. Following parties may be losing as a result of inventory theft by the employees.
(a) Store owners and partners were losing on their commissions, as the incidents were contributing to the operating losses.
(b) Investors and shareholders who lost on their share of earnings lost due to bad sales.
(c) Government and tax collecting authorities who lost of their share of tax as a result of theft.
(d) The company as whole who might have lost goodwill and brand value as a result of the genuine goods being sold in market at dirt cheap price ( Assuming that the employees must have sold the stolen goods at much lower price than the market rate)
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