[Anonymous]

Proper segregation of duties reduces the opportunities to allow any employee to be in a position to both

Journalize cash receipts and disbursements and prepare financial statements.

Monitor internal control and evaluate whether the controls are operating as intended.

Adopt new accounting pronouncements and authorize the recording of transactions.

Record and conceal fraudulent transactions in the normal course of assigned tasks.

D. This answer is correct because a proper segregation should be designed to attempt to prevent any employee from recording and concealing fraudulent transactions.

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Can’t “concealing” also be considered a record keeping duty, since you can choose to not record a fraudulent transaction, which means D does have proper segregation of duties?

[OlintoJr]

No… The point here is that if someone has record keeping duties they should not be allowed to conceal the fraud in other ways(I.e. If they also are responsible for receiving checks from clients). In this scenario they can sign the check to themselves and never record the receipt.

I think “conceal” should be a buzz word when answering this type if question. Any time someone has an OPPORTUNITY to conceal fraudulent activities there clearly is a lack in seperation if duties.

God damn I love accounting. CPA baby!!!!

FAR - 11/30/14 -79
AUD - 2/19/15 -86
BEC - 4/09/15 -86
REG - 11/30/15 -87

I'M DONE! ITS OVER! WOOOOOOO!!!!!!!

[Anonymous]

No, it's a perfectly legitimate question. Proper segregation of duties requires the functions of recording transactions, authorizing transactions, and custody of assets are all separated. Therefore, D is the only answer that makes sense, you could easily use process of elimination to answer this question.

A is wrong because while posting journal entries involves record keeping, authorization of transactions and custody of assets has nothing to do with preparing the financial statements.

B is wrong because it has nothing to do with recording or authorizing transactions or custody of assets.

C is wrong because no company would issue new accounting pronouncements, however authorizing transactions would be a component of proper segregation of duties

D is correct because the others are wrong, but if you need a good reason, think of something like lapping. In a lapping scheme an employee would theoretically have control over both the record keeping and custody functions: the employee would steal cash payments, then cover up the fraud by applying future payments from other customers to the accounts whose cash payments were diverted to the employee as part of the fraud.

You really don't need to think that hard about this question, if you are familiar with the three components of segregation of duties then this question should be a gimmie.

[Author]

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