Internal control analysis.(CMA adapted, December 1992) LCK Corporation manufactures small tools such as hammers and screwdrivers. Many of LCK’s employees pocket some of the firm’s manufactured tools for their personal use. Since the quantities taken by any one employee were typically immaterial, the individual employees did not consider their actions detrimental to LCK. As the company grew larger, management instituted an internal audit department. The internal auditor charted gross profit percentages for particular tools and discovered higher gross profit rates for tools related to industrial use than for personal use. Subsequent investigation uncovered the fraudulent acts.
As an internal auditor, what steps would you take to uncover the fraud? What additional internal controls should LCK Corporation institute to prevent this problem from occurring in the future?
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