Her rationalization for her stealing would have been I work so hard and contribute a lot to this store, the store owes her.

1. Levis overlooked several internal control concepts. a. Segregation of duties over cash receipts and recording. Betty handled all of the cash that came into the business and maintained the cash receipts and sales records. If Levis could have one person receive cash and one person record the receiving of cash, Betty would have no opportunity to steal the cash. However, Betty has too many responsibilities and chances to steal the assets. b. Lack of adequate document for sales transactions. The store records sales transaction only in sales tickets. It’s too easy for Betty to deceive by making up tickets. The store should have a complete accounting system to record the purchase and sale of products, the receiving and payment of cash, etc. c. Lack of authorization procedure. Betty is able to handle the whole procedure of the transaction without the authorization from management. It gives Betty great opportunity for cheat. d. Lack of physical controls to safeguard assets such as cash. Betty is able to get cash without the supervision of anyone else.

2. If the CPA is responsible for auditing the business’s annual financial statements, he should inform the possibility of asset stealing once because he said he had noticed occasional shortages in the cash receipts records that seemed larger than normal for a small retail business. He should investigate the issue and report it in the audit report both to the audit committee and store management.

3. A. For small retail businesses, every transaction should be authorized by the owner. Because small business may not have so many transactions, every transaction may make a difference to the overall operation. They should make sure inventory cannot be sent to customers