ACCA Applied Knowledge · Business and Technology · Internal controls
A company's cashier receives customer cheques, records them in the cash book and also prepares the bank paying-in slips and reconciles the bank account. Which fraud risk is most directly increased by this arrangement?
The main risk is lapping of receivables to hide theft of cash. One person handles cheques, records them and reconciles the bank, so segregation of duties is absent. That lets the cashier steal receipts and conceal the shortfall without anyone independent checking the records.
- ALapping of receivables to conceal theft of cashCorrect
- BOverstatement of non-current assets through revaluation
- CCollusion between the purchasing and sales departments
- DMisclassification of capital expenditure as revenue expenditure
Explanation
The cashier has combined custody of cash, recording and reconciliation, so a lack of segregation of duties exists. This allows cash to be stolen and concealed, for example by lapping, where later receipts are used to cover earlier thefts. The other options do not arise mainly from this duty combination.
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