Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

Which of the following arrangements of duties could most likely lead to embezzlement or theft within an organization?

Requiring two signatures on all checks above $5,000

Separating the responsibilities of authorizing transactions and recording them

Allowing the same employee to both authorize payments and reconcile bank statements

Having independent internal audits conducted regularly

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Verified step by step guidance

Step 1: Understand the concept of internal controls in financial accounting. Internal controls are processes and procedures implemented by an organization to safeguard assets, ensure accurate financial reporting, and prevent fraud or theft.

Step 2: Analyze the duties mentioned in the problem. Each arrangement of duties represents a different internal control mechanism or lack thereof. Evaluate how each arrangement impacts the risk of embezzlement or theft.

Step 3: Focus on the arrangement 'Allowing the same employee to both authorize payments and reconcile bank statements.' This creates a conflict of interest and bypasses the principle of segregation of duties, which is a key internal control to prevent fraud.

Step 4: Compare this arrangement to the others listed. For example, requiring two signatures on checks above $5,000 adds a layer of approval, separating responsibilities for authorizing and recording transactions reduces risk, and independent internal audits provide oversight. These arrangements strengthen internal controls.

Step 5: Conclude that allowing the same employee to both authorize payments and reconcile bank statements is the arrangement most likely to lead to embezzlement or theft, as it lacks proper segregation of duties and oversight.