[etg1991]

Which of the following situations could most likely lead to an embezzlement scheme?

A. The accounts receivable bookkeeper receives a list of payments prepared by the cashier and personally makes entries in the customers’ accounts receivable subsidiary ledger.

B. Each vendor invoice is matched with the related purchase order and receiving report by the vouchers payable bookkeeper who personally approves the voucher for payment.

C. Access to blank checks and signature plates is restricted to the cash disbursements bookkeeper who personally reconciles the monthly bank statement.

D. Vouchers and supporting documentation are examined and then canceled by the treasurer who personally mails the checks to vendors.

Correct answer is C, but I dont understand why since the access has already been restricted. This is the answer given:

Allowing the bookkeeper to have access to the accounting records and to the signature plates, which effectively enables the bookkeeper to initiate unauthorized transactions, while also having responsibility for preparing the monthly bank reconciliations is an improper segregation of duties.

Thanks in advance!

AUD - 75
BEC - NINJA in Training
FAR - 75
REG - 84

Success is not final, failure is not fatal: it is the courage to continue what counts - Winston Churchill

[livealittle]

if the person who reconciles the bank also has access to the blank checks and signature stamps, that person can write a check to themselves/or whoever they owe money to/i.e. their mortgage company, sign the checks with the signature stamps/plates and then when the bank statement comes, mark it as ok/legit.

people who can initiate payments/write/sign checks should not ALSO be able to reconcile the bank

that person could ok/approve the fraudulent checks

BEC - 8/8/16
REG - 66, 77
AUD - 81
FAR - 9/8/16

[Island Mango]

From what I learned with Roger, I'd apply the mnemonic ARCC (authorization, recording, comparison/reconciliation, custody) in segregation of duties. Ideally, these functions should not be performed by the same person. Hence C as the best answer. Also, in my experience, cash disbursement bookkeepers being a low level function do not usually have access or custody of signature plates & blank checks. Those are usually handled by higher level/supervisory personnel accounting personnel or treasurer. And as the mnemonic goes, reconciliation and custody (in this case access) should be separate. Hope this helps.

AUD - 76
BEC - 83
FAR - 79
REG - 76

Dust yourself off and keep moving.

[livealittle]

@Etg1991
when I reread the options, I realized what you meant by “is already restricted”. the way I read the option the second time, it's restricted to the cash disbursements bookkeeper. That would be fine if he/she didn't ALSO reconcile the monthly bank statement.

do you see the potential for embezzlement? misappropriation of funds?

BEC - 8/8/16
REG - 66, 77
AUD - 81
FAR - 9/8/16

[etg1991]

Hi guys,

Thank you so much for replying. I usually apply the mnemonic ARC as well and realized this was a red flag but the “restricted” part threw me off and I said, oh then it is ok. I see now that he/she shouldn’t have access to the blank checks in the first place because entry level staff usually don’t write checks and that’s a potential case of embezzlement. Thank you again! Have a great Sunday.

AUD - 75
BEC - NINJA in Training
FAR - 75
REG - 84

Success is not final, failure is not fatal: it is the courage to continue what counts - Winston Churchill

[Sal]

Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?A. Determine whether inventory ordered before the year-end was included in the physical count.
B. Inquire about payroll checks that were recorded before year-end but cashed after year-end.
C. Investigate changes in capital stock recorded after year-end. [ Answer]
D. Review tax returns prepared by management after year-end.

could some one briefly explain why we need to investigate capital stock to obtain evidence about the occurrence of subsequent events? I see how other options are wrong I just wanna see if there is anything we should be looking for in capital stock. Thanks in advance 🙂

- SAL

[Author]

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