Explain why each of the following combinations of tasks should or should not be

Question

Explain why each of the following combinations of tasks should or should not be separated to achieve adequate internal control.

a. Approval of bad debt write-offs and the reconciliation of the accounts receivable subsidiary ledger and the general ledger control account.

b. Distribution of payroll checks to employees and approval of employee time cards. separated.

c. Posting of amounts from both the cash receipts and the cash disbursements journals to the general ledger.

d. Writing checks to vendors and posting to the cash account.

e. Recording cash receipts in the journal and preparing the bank reconciliation.

Explanation / Answer

Answer)

a) These two tasks do not need to be separated because no conflict exists between writingoff bad debts (asset accounts receivable) and reconciling accounts payable (liability).

b. These two tasks need to be separated because they are independent of one another.

c. In neither case does the employee have access to the assets; therefore, no danger exists.

d. These two tasks do not need to be separated because there is control both over theoutflow of cash and posting to the cash account.

e. These tasks should be separated. The employee records the transactions and has access toassets.To allow the employee to verify the accuracy of the records would allow him or her tocover up any money embezzled by doctoring the bank reconciliation

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