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ACCA Applied Knowledge · Business and Technology · Internal controls

In a small retailer, the same employee receives customer cash, records the sales in the ledger and prepares the bank paying-in slips. Which additional control would best address the risk created?

An independent employee should reconcile the bank statement to the cash records. This acts as a compensating control when one person handles cash and records, since a second person can detect any difference caused by theft or manipulation.

  1. ARequiring a different employee to reconcile the bank statement to the cash recordsCorrect
  2. BIncreasing the employee's salary
  3. CProviding the employee with additional training in the accounting software
  4. DInstalling a password on the employee's computer

Explanation

The risk is that cash could be stolen and the records manipulated to hide it. Independent reconciliation by another person acts as a compensating control where full segregation is impossible. A salary rise or training does not detect misappropriation, and a password does not stop the employee's own access.

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