Romney & Steinbart (2006) states that, Good internal control requires that no single employee should be given too much responsibility over business transactions or processes. An employee should not be in a position to commit and conceal fraud.'
Segregation of Accounting Duties
In accordance to Romney & Steinbart (2006), effective segregation of accounting duties is achieved when the following functions are separated: Authorisation approving transactions and decisions
Recording preparing sourcing documents; entering data into online systems; maintaining journals, ledgers, files or databases; preparing reconciliations; and preparing performance reports Custody handling cash, tools, inventory or fixed assets; receiving incoming customer checks; writing checks on the organisation's bank account
The first situation identified of inadequate segregation duties occur in accounting duties. The Pets Plus Assistant Accountant is responsible for the banking as well as updating the ledger accounts. This becomes an issue for the business as it is possible for him to steal a certain amount of cash and falsify the journal entries to correspond with the amount to bank. This can also be applied to the Accounts Clerk who also handles the cash and cheques and is also able to update the ledger accounts if the Assistant Accountant is busy. Furthermore, cash and cheques do not always get banked at a certain day or time within a week. The inadequate segregation of duties, in regards to handling both the banking and maintaining the ledger accounts becomes an issue when incorrect posting to general ledger accounts and incorrect or non-existent customer accounts occur. In order to overcome the inadequacy presented, an ideal situation is to assign the duties of cash and cheques to...