Waji Boutique

[pic 1]

BKAL 3063 INTEGRATED CASE STUDY

GROUP E

PREPARED FOR:        MDM. ROHANA @ NORLIZA BINTI YUSOF

PREPARED BY:        NURUL FATIHAH BINTI CHE YAHYA                        221336

                        NOOR ATIKAH BINTI RAMLI                                221391

                        NOR HALIZA BINTI ABDUL GHANI                        221434

                        NURUL AISHAH BINTI MOHD HALIM                221721

                        CHEANG HUI YI                                                222058

DUE DATE: 15thSEPTEMBER 2015[pic 2]

Mr Bashir Ahmed owned a boutique. A salesperson and the only employee, Khawar was hired. Unfortunately, after seven month of work, Khawar left work without prior notice and lost contact. Mr Bashir was shocked to discover all the fraudulent activities and deceptive tactics that Khawar had done. It was inventory mismanagement, accounts manipulation and hidden loans on company’s accounts.

 The recommended plan of action to solve such issues is to implement a computerized system and install physical safeguards in the business place. The computerized system will make sure that all transactions can be recorded accurately and authorized only particular person to access certain important transaction such as loan while the physical safeguard such as CCTV can help Mr Bashir to monitor everything takes place in the boutique including employee’s behavior as well as the customers. Both can help to minimize wrongdoings from happening.

Contents

Introduction        

Statement of the Problem        

Causes of the Problem        

Decision Criteria and Alternative Solutions        

Recommended Solution, Implementation and Justification        

Conclusion        

References        

Introduction

The case of Waji Boutique was about the salesperson and the only employee in the shop, Khawar who has left the job without prior notice and the owner, Mr Bashir was then finding out all the fraudulent activities done by Khawar. Mr Bashir was in the decision process on how to solve such problems happened in his boutique.

Statement of the Problem

Inventory mismanagement

When Khawar left work without prior notice, Mr. Bashir wasshocked to find out the discrepancy in his inventory. There were some hottest selling items were correct in records but the old inventory items were not. Another symptom was Mr Bashir realized that Khawar had kept the tags on the outfits as they were but had sold different parts of the dress separately only after being told by a customer.The result was the inventory of the boutique was not organized and had no accurate records. This problem would affect the long term operation of the boutique because customers might perceive that the boutique was selling the clothes at unreasonable price.

Hidden loans on company account

Khawar bought his family clothes from neighboring shops on company’s account and loaned some money from them on company’s name. The liability of the boutique had increased and Mr. Bashir would have to spend additional money to solve the hidden loans.

Discrepant accounts

The discrepancy in accounts took place when Khawar made hidden loans on company’s account and also whenKhawar borrowed money for buying his family clothes by using company’s name.Besides, whenKhawar sold the dresses separately, company’s account had also being manipulated.

Causes of the Problem

Inventory Mismanagement

To manage the inventory of boutique, Mr Bashir had implemented two-tag system. However, there were some loopholes found in the two-tag system. Firstly, Mr Bashir had only matched the tags of the sold merchandise during end of every month rather than frequently did the matching job every week. Besides, he had also just visually checked the clothes placed in the boutique instead of doing the physical checking on each of the clothes placed in the boutique. In addition, another factor which had caused discrepancy in the inventories was Mr Bashir had only randomly picked some samples and noted their tags so to match them with the ones at home. When it came to reordering the clothes, the owner, Mr Bashir had also just asked and accepted all suggestions from his only employees, Khawar. Next, the problem of a usually three piece suit that had trousers, shirt and scarf which had been sold separately by Khawar had clearly shown that how Mr Bashir managed his inventory was not effective.

The Fraud Triangle model can be used to explain why such inventory mismanagement could happen. There are three elements emphasized in the model, which refer to the perceived pressures, perceived opportunity and rationalization. In this case, perceived opportunity would be the main factor. The only salesperson and employee, Khawar had gained the opportunity to make such fraud especially when noting that Mr. Bashir would never visit the shop during 4.00 p.m. to 8.00 p.m. This weakness refers to lacking in frequent monitoring by the owner towards his employee’s behavior and also the boutique itself. Moreover, since the owner   handled all aspects of the business to the only staff, the risk of cheat was actually very high as there was no one else can know what was happening with the business except that particular staff himself. This weakness refers to lacking in segregation of duties. Besides, there is also lacking of physical safeguard in the boutique such as CCTV. Since the shop had not installed any physical safeguard, the only employee, Khawar would have the opportunity to do anything that could harm the benefit of the shop without knowledge of the owner.

Hidden loans on company account & Discrepant accounts

Internal controls are necessary to reduce the risk of fraud. Without any controls or oversight, it is like leaving the door unlocked with the cash register drawer open hoping that no one will steal any money. Plus, with the additional pressure of a declining economy, the temptation can become too great for some people if there are no controls in place. Also, without internal controls a business owner can never know if their information is complete, accurate or reliable (Long, 2009). Hence, the main factors posed such problems were lack of controls andall account of the business was handled by Khawar alone instead of the owner himself. Mr Bashir had putting too much trust on his only employee. Therefore, it caused Khawar bought his family clothes from other shops by using company’s account and also made loan on behalf of the company all without the consent from the owners.