Assignment 4
Saks Fifth Ave.
Auditing Case

Question 1: In my opinion, the store’s zero-tolerance policy for theft was unreasonable. An employee which may otherwise have been an excellent worker may have had a momentary lapse such as was the case of Fierro. The store’s zero-tolerance policy has thus removed a top employee for what was a trivial amount of $10 dollars, which may not even be considered as theft, as the employee discounts were permitted in other areas of the store. I believe that a minimum amount of theft under which a due warning is given before dismissal would save the store prohibitive costs to fire and hire a replacement, and it could also serve as a correctional measure. Nonetheless, Fierro was also guilty of counterfeiting signatures, for which action a different disciplinary measure should be instated. I believe that the zero-tollerance policy is not cost effective in that it may eliminate employees for minor losses, transgressions which may be corrected by milder disciplinary action, and thus save costs for re-hiring.

Question 2: I don’t believe that the anti-harassment policy and complaint procedure qualify for internal controls, as they are just procedures and guidelines for preventing harassment and racial discrimination within the company, but they don’t involve the members of the organization and do not constitute of a process, but merely of guidelines. COSO defines internal control as “a process, effected by an entity’s board of directors, management and other personnel. This process is designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.” Moreover, an internal control is not merely documented by policy manuals and forms. Rather, it is put in by people at every level of