Question

Ch.12 Discussion topic: Internal Control Deficiency: Frank James, a highly competent employee of Brinkwater Sales Corporation, had been responsible for accounting-related matters for two decades. His devotion to the firm and his duties had always been exceptional, and over the years, he had been given increased responsibility. Both the president of Brinkwater and the partner of an independent CPA firm in charge of the audit were shocked and dismayed to discover that James had embezzled more than $500,000 over a 10-year period by not recording billings in the sales journal and subsequently diverting the cash receipts. What major factors permitted the embezzlement to take place? (please also add / specify any noted internal control deficiencies/ weaknesses in any of 5 areas of internal control structure components, in Brinkwater internal control process)

Answer 1

Answer:

The most significant lack or deficiency on entity's internal  control which permitted the embezzlement to happen was the incapable to appropriately isolate the accounting obligation to record billing in the sales journal from the custodial duty of cash receipts .Separation of the authority of assets from accounting work force is proposed to maintain a strategic distance from misappropriation of assets when the two capacities are performed by one faculty it might be happened that he can misuse the assets for their staff profit and change the records to relieve him of charge of assets with exposure increment.

Notwithstanding how dependable I showed up no worker must be given the joined duty or combined responsibility of accounting the assets and custody of those assets.