Available Options Are:
A. Will uncover collusion among employees
B. Are important only in very large businesses
C. Are especially important in handling cash
D. Make it easy for an employee to cover up the theft of an asset
E. None of the above
Answer:
Option B. Are especially important in handling cash
Explanation:
The statement is talking about segregation of duties in which a single task is completed by multiple persons. This helps in preventing of frauds and errors in an organization. It is common in almost most of the operations but in the above options, option C cash handling is the right answer. The options uses the practical application of segregation of duties by breaking up the handling of the cash into cash payments and accounting for the transaction in computer system.
Option is A is incorrect because it is a preventing control not a detective control hence cann't uncover frauds.
Option B is incorrect because segregation of duties is equally important in small organizations as well.
Option D is incorrect because it is a preventing control not a defect in internal control system that helps in covering up of theft of an asset.
When the transactions related to the recording of the asset are distinct from the custody so it is of handling the cash.
In the case when the procedure is reqiuired where there is the duty of recording the asset transactions that should be distinct from the custody so it is important for cash handling. In the case when the single person is liable for both recording the handling the cash so it should be the opportunity for stealing the cash and cover up the theft.
Therefore, When the transactions related to the recording of the asset are distinct from the custody so it is of handling the cash.
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