Question

A mediumsized regional firm distributes packaged snack foods to convenience stores. A routine inventory has revealed significant amounts of inventory missing from the delivery trucks. Which of the following suggests a control weakness that may provide an opportunity for fraud?

A. Truck drivers are allowed to use the trucks for personal reasons, including taking them home at night, as a benefit of employment.
B. Access to the warehouse is restricted to a few trusted employees.
C. Careful counts are made as inventory is loaded on the trucks.
D. The policy and procedure manual clearly defines allowed and prohibited actions.

Answer 1

Missing inventory from delivery trucks implies a control weakness, particularly in cases where truck drivers can use vehicles for personal reasons. Such a policy may facilitate unauthorized usage and potential fraud. Strong access controls, strict inventory counts, and clear policies support a robust supply chain and safeguard against inventory loss. The correct option is A. Truck drivers are allowed to use the trucks for personal reasons, including taking them home at night, as a benefit of employment.

Step-by-step explanation:

A significant amount of inventory missing from delivery trucks at a medium-sized firm distributing snack foods suggests a potential control weakness. The possibility for fraud is highest in option A, where truck drivers are allowed to use the trucks for personal reasons and take them home at night.

This benefit could provide an opportunity for unauthorized access to the inventory, potentially leading to theft or mismanagement. In contrast, options B, C, and D are indicative of stronger control measures with restricted access to the warehouse, careful accountability during the loading of inventory, and a well-defined policy and procedure manual.

It is crucial for a firm to balance efficiency with stringent control mechanisms to safeguard assets and ensure health and wellness through the proper distribution of store foods. Enhancing control measures and emphasizing ethical labor practices are essential steps towards mitigating risks and improving supply chain integrity.