Howard Street Jewelers - Case Study Example

HOWARD STREET JEWELLERS. Howard Street Jewellers Consider the longevity of this fraud. What allowed this fraud to go undetected for so long? Do you think that most similar frauds are detected?The fraud might have taken place for almost 10 years because Betty the cashier had worked for the store for 20 years. The first 10 years of work she spent trying to build confidence with the owners before she started stealing from them. The fraud might have been possible by two major things. The trust the cashier received from the owners and the fact that the cashier was allowed to keep all records and receipts.

The owners did not suspect her since she had been a long time employee. Allowing her to keep all the records and receipts was a mistake because she was able to manipulate the books and documents of accounts in the way she desired. This gave her a good chance of covering up her fraudulent actions. Many frauds of this nature are made possible by ignorance of owners when it comes to studying books of accounts and awarding of a lot of trust to employees which is dangerous. 2. How was this fraud detected?

What other warning signals should the Levi’s have watched for? What accounts or ratios may have signaled that a problem was occurring?The fraud was detected due to the receipts from the shop that showed high costs for such a small business. Studying of the account books by Alvin more often also allowed them to detect the fraud. The Levi’s should have paid attention to Betty’s lifestyle as it was changing inconcurently with her earnings. The increase in costs of operation for the shop should have also been a sufficient heads up.

The ratios of costs of operation and the size of the business are the ones that raised an alarm to the accountant. In addition, the shop was facing downward movement in terms of profits and earnings. The business was going downhill.3. Were the cash shortages directly related to the fraud? If there is no theft of cash, why are businesses more likely to have cash shortages than overages?The cash shortages were not directly related to the fraud. The reason why businesses have cash shortages even if there is no theft of cash is because of the exaggerated receipts that show high operational costs. 4. The external accountant did not perform an audit in this case.

Do you believe he bears any responsibility for the fraud? The accountant does not bear any responsibility because he is an external accountant and doing an audit for a private business is not one of his legal duties. He is only expected to do it if contracted by the owners of the private business (Petrucelli 2013). References.Petrucelli, J. R. (2013). Detecting fraud in organizations: Techniques, tools, and resources. Hoboken, N.J: Wiley.