Steinman & Lee, an Ontario restaurant chain, recently closed one of its restaurants, The Steinman Café. This was the first indication that the company was in trouble. Graham Stewart, general manager of Southview Mall location recently had a conversation with the bookkeeper Diana Calhoun, regarding to cash discrepancies which could account for the trouble. All evidence seems to indicate the President, Barry W. Steinman, has been misappropriating cash deposits for the take-out and delivery service.
Issues
There are many internal controls that can be implemented to avoid these problems. Primary ones include, assigning responsibility, segregating duties and defining documentation procedures. Assigning responsibility holds people accountable for their work, while segregation of duties allows internal checks of each employees work; this helps avoid errors that cost the company time and money.
Barry Steinman has control over many aspects of the business and there is nobody to check his work or evaluate it. This issue is most apparent in the misappropriation of take-out, catering, and delivery revenues. Key contributing factors of Steinman¡¦s unilateral control are that he:
• set-up the operating systems for the catering venture
• made all pricing decisions
• established cash handling and reporting procedures
• personally trained the bookkeeper, with cash deposit instructions
• key signatory on all disbursements and cheques
These issues came to light when catering and take out were moved to the profitable Southview Mall location. Stewart was unaware of these factors and recently discovered he may be held accountable for these revenue losses ...