I. Background/Issues and Concern

Rosemary Worth was talking about the consequences of a theft that had recently occurred at the business she owned, Private Fitness, LLC. Private Fitness is a small health club located in Rancho Palos Verdes, California, an upscale community located in the Los Angeles Area. As manager of the business, Rosemary hired Kate Hoffman, one of the instructors and a long-time friend. Kate’s primary tasks included marketing, facility upkeep, scheduling of appointments, and record keeping.

II. Problem Statement

What should be the procedures or controls that Rosemary could use to protect her business’s assets?

III. Point of View

There is an existing employee fraud in the company done by Kate, who is a long-time friend and at the same time, valuable instructor and marketer. Since this is a serious offense made by Kate, a better control is needed to avoid incidents like these. Another thing is the company is not yet stable when it comes to policies/regulations. Proper segregation or delegation of duties must be done. Only one person is designed to do the recording of revenues and receiving of cash which is Kate. That’s the reason why Kate can have the opportunity to conceal fraud.

IV. Objectives

Specifically, the objectives of the study are the following:

1. To ensure that revenues are all recorded;

2. To make sure cash and cash in bank be equal to revenue recorded; and

3. To implement a better internal control.

V. Areas of Consideration

1. If employees can adapt the change.

2. If Rosemary would be willing to spend time monitoring her business.

3. If Rosemary would be willing to put boundaries between personal and business