CASE 3.6
BURANELLO’S RISTORANTE
Synopsis
Employee theft is a widespread and serious problem facing the multitude of small businesses
that play such a critical role in the U.S. economy, which is the key reason that phenomenon is a focal
point of several of the “internal controls” cases that I have written, including this one. This case
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Buranello’s Ristorante—Key Facts
174 Case 3.6 Buranello’s Ristorante
1. Buranello’s recently faced a problem that plagues many, if not most, small businesses, namely,
employee theft.
3. The key evidence pointing to O’Neil was the fact that the cash shortages began occurring shortly
after he was hired by Buranello’s.
5. At the close of business one evening, Barnes intentionally understated the cash receipts reported
6. The next day, O’Neil discovered the excess cash not reported on the deposit slip; O’Neil hid the
cash in Buranello’s safe because he believed that he was being “set up.”
8. After being taken into custody, O’Neil told the police that he hadn’t stolen the excess cash but
instead had hidden it in Buranello’s safe; after finding the cash, the police released O’Neil.
9. O’Neil didn’t return to work at Buranello’s but one month later filed a “malicious prosecution”
Instructional Objectives
Case 3.6 Buranello’s Ristorante 175
1. To demonstrate that employee theft is an important internal control issue for many, if not most,
small businesses.
2. To identify appropriate measures that can be implemented to remedy internal control
Suggestions for Use
Even novice accountants can appreciate the importance of providing controls over cash and cash
processing activities. This case allows students to discuss control risks related to cash that are
present in a setting with which most of them will be very familiar, namely, a restaurant. An
important point to make when covering this case is that small businesses often do not have sufficient
resources to operationalize some of the most basic internal control concepts, such as adequate
Suggested Solutions to Case Questions
1. Listed next are specific internal control weaknesses evident in Buranello’s operations followed
by a brief discussion of the given control risks. Your students will likely come up with additional
control weaknesses, most of which will be closely related to one of these items.
a. Weak control environment: Michael Barnes’ attitude toward his “back office” responsibilities
suggests that he is not setting a good “tone at the top” for Buranello’s. His subordinates, no doubt,
perceive that he does not place a sufficient emphasis on his control-related responsibilities, which
176 Case 3.6 Buranello’s Ristorante
when preparing daily sales reconciliation worksheets (and Barnes when reviewing those worksheets)
to continually “reinvent the wheel.” The likely result is that the same type of reconciling item may
be dealt with differently by the shift managers.
e. Failure to review daily sales reconciliation worksheets on a timely basis: An effort should be
made to identify and then investigate significant cash shortages as quickly as possible so they can be
properly addressed and investigated. Since Barnes allows the daily sales reconciliation worksheets
to “pile up” on his desk, this control objective is not being accomplished.
2. Here are proposed remedial measures for the control weaknesses identified in the suggested
solution to case question #1, including a discussion of their apparent cost-effectiveness.
a. Other than hiring a new general manager, there is not an easy “fix” for this control weakness.
One suggestion: Marta Giordano could have a heart–to-heart discussion regarding the importance of
internal controls with Michael Barnes or appoint a proxy (such as a representative of Buranello’s
accounting firm) to do so. Would this measure be cost effective? The monetary cost of this measure
would be effectively zero, while the resulting benefits could be enormous. (This latter assertion
stems from the fact that the control environment is easily the most important element of an internal
control system. Improving that feature of a control system can have pervasive positive consequences
Case 3.6 Buranello’s Ristorante 177
d. Solution: develop a standard template or legend for shift managers to reference when
addressing unusual reconciling items. This template would briefly indicate exactly how to deal with
any given type of reconciling item. Cost-effective: absolutely.
e. Here again, the issue is changing Michael Barnes’ mindset. The cash shortages experienced by
Buranello’s should reinforce to him the need and importance of “clearing” the daily sales
reconciliation worksheets as quickly as possible. Cost: effectively zero. Benefit: significant.
f. If the three previous internal control weaknesses are properly resolved (in particular item “c”),
then this problem should be mitigated to some degree, if not a significant degree. The benefit of
remedying this internal control weakness makes the suggested solutions to the three previous
weaknesses even more cost-effective.
g. Placing the daily deposit in the overnight deposit box at the bank would eliminate the risk that
an overnight break-in would result in the theft of the deposit (granted, there is some risk that the shift
manager could be robbed late at night on the streets of Boston!). Cost-effective? Difficult to assess.
3. Consider converting this question into a group project in which small groups of students visit
different local restaurants and develop a list of internal controls evident within each one. Students
could then compare, contrast, and discuss their findings in class. Recognize that the control
activities observed by students will likely vary as a function of the size and sophistication of the
restaurants they visit. Nationally franchised restaurants, for example, typically have more
formalized control procedures than local, family-owned restaurants. Note: prior to such a group
178 Case 3.6 Buranello’s Ristorante
the likelihood that customers will use invalid currency to pay their bills.
c. Disclaimers or caveats appearing in the restaurant menu, such as, whether or not
course)—the overarching internal control objective here would be to comply with
applicable laws and regulations.
f. Using “servers” rather than waiters or waitresses to deliver meals: the overarching
internal control objective here is to enhance the efficiency and effectiveness of
operations (having servers deliver the food helps ensure that customers receive their
meals as quickly as possible and thus enhances their satisfaction).
4. In responding to this question, students should first attempt to place themselves in Barnes’
position. Recognize that Barnes was both infuriated and extremely embarrassed by the recurring
cash shortages. [Note: unfortunately, there was no indication in the legal opinion as to the absolute
size of the cash shortages.] Someone who is desperate is more inclined to use desperate measures,
which is why he apparently came up with the idea of a sting operation. Was the sting operation
“appropriate”? This is a good question to ask your students to discuss and debate. But, again, it is