Question

Assume the clerk had stolen $1,800 cash, and recorded an entry for a nonexistent NSF check to reduce the cash balance so that it would match the bank balance. Select the internal control practice that would have most likely prevented this fraud. Separation of duties. Maintaining a bank signature card. Hiring competent employees. Performance evaluations. Required vacation.

Answer 1

Option A. Sepratation of duties is the correct answer.

Step-by-step explanation:

The reason is that the clerk is the person who is responsible for preparing both the bank reconciliation, entry postings and handling of cash. This their is no check and balance on the clerk, which constituted to fraud motivation. So having segregation of duties, which means one person is solely responsible for posting of entries in the ledger, other handling of cash and the third one preparing the bank reconciliation would prevent the fraud in the future.