Multiple Choice
Which type of business tort occurs when one business unlawfully takes a competitor’s employee, often resulting in the loss of trade secrets or confidential information?
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
Multiple Choice
Which of the following would NOT represent good controls over cash disbursements?
A
Requiring dual signatures on checks above a certain amount
B
Using pre-numbered checks for all disbursements
C
Allowing the same employee to both authorize and record cash disbursements
D
Reconciling bank statements monthly by someone independent of cash handling
Verified step by step guidance1
Understand the concept of internal controls over cash disbursements. Internal controls are procedures and policies designed to safeguard assets, ensure accurate financial reporting, and prevent fraud or errors.
Review each option provided in the problem to determine whether it represents a good control over cash disbursements. Good controls typically involve segregation of duties, authorization procedures, and independent verification.
Analyze the first option: 'Requiring dual signatures on checks above a certain amount.' This is a good control because it ensures that large disbursements are authorized by more than one person, reducing the risk of fraud or error.
Evaluate the second option: 'Using pre-numbered checks for all disbursements.' This is also a good control because it helps track all checks issued and prevents unauthorized or missing checks.
Examine the third option: 'Allowing the same employee to both authorize and record cash disbursements.' This is NOT a good control because it violates the principle of segregation of duties, increasing the risk of fraud or errors. Proper controls require that authorization and recording be handled by separate individuals.
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