Solved: Anasazi Earth Clothing is a retail store specializing

Anasazi Earth Clothing is a retail store specializing

Anasazi Earth Clothing 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 $100. If the item is more than $100, 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 manager 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 Anasazi Earth Clothing have reached an all-time high. There are a large
number of returns under $100 without receipts.
a. How can sales clerks employed at Anasazi Earth Clothing use the store’s return policy to
steal money from the cash register?
b. What internal control weaknesses do you see in the return policy that make cash thefts
easier?
c. Would issuing a store credit in place of a cash refund for all merchandise returned without a
receipt reduce the possibility of theft? List some advantages and disadvantages of issuing a
store credit in place of a cash refund.
d. Assume that Anasazi Earth Clothing is committed to the current policy of issuing cash refunds
without a receipt. What changes could be made in the store’s procedures regarding customer
refunds in order to improve internal control?

Anasazi Earth Clothing is a retail store specializing

ANSWER
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