Question

According to a recent article from Forbes, retail operations in the United States are experiencing over $60 billion a year in losses primarily due to employee theft. Imagine you have been hired as a loss prevention specialist for a large retail chain and your first assignment is to identify and address the current problems with inventory shrinkage. Select and discuss one of the following internal controls below you would implement to help prevent future employee fraud/theft? Be sure to provide your rationale.

• Option A: More stringent background screenings for new hires (i.e. reference checks, criminal record checks, credit record checks)
• Option B: Tighter security controls (i.e. video surveillance, random inventory/cash audits, computer system audits, segregation of duties)

Answer 1

Employee fraud or theft is one of the major reason for inventory shrinkage in large retail stores. As a loss prevention specialist, we would choose “Option-A: More stringent background screenings for new hires (i.e. reference checks, criminal record checks, credit record checks)” to implement as internal controls to prevent employee theft and fraud. The rationale to select this option is as below: Employees are the backbone of any organization and are the one of the biggest asset for an organization. By checking employees background, credit report and criminal records etc. we can ensure that the employee is honest towards his duties and is not supposed to do any misconduct.