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ACC 340 - Midterm Exam

ACC 340 - Midterm Exam

Author: Robert Montan

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1)Would it be okay if your AR Clerk, who handles receipts, also reconciles the bank statement at the end of the month? Why or why not? 

 This is not okay, what is preferred nor what is ethical. The reason why this is an accounts receivables agent, an accounts payable and a bookkeeper is to allow for more oversight and to give an opportunity for the reconciliation to be looked at by more than one individual’ as to better catch any errors. Furthermore, If the accounts receivables clerk is also the individual reconciling the bank statement at the end of the month. There is a higher propensity for internalfraudulent activity to occur. One such example is called lapping. The most prevalent type of internal fraud scheme is lapping. Lapping of accounts receivable is the recording of payment on a customer's account sometime after the payment has been received. The basic lapping scheme operates as follows: the employee has misappropriated company funds through customer A's account, by diverting a cash payment or issuing a refund payable to the employee.In order to conceal the misappropriation, the employee now records payments made by customer B to customer A's account, payments made by customer C to customer B's account, and so on. Lastly, If a person has access to both the cash receipt and bank reconciliation functions, it is much easier to commit fraud by altering the amount of incoming receipts, and then pocketing the difference. To avoid this, each function should be handled by different people within the company.  

 2)The company's environment has two aspects. One is the external environment. Which of the following is not an external environment factor?
d.Tone at the Top 
 3)Name two methods that are commonly used to speed up the collection of receivables. 
 The cash of a business is tied up, amongst other places, in its receivables and this is the easiest place for most businesses to reduce their cash requirements. If you can reduce the average time forcollection of your receivables, this will have a direct impact on the amount that you are borrowingor on cash available for other purposes. Give customers credit ratings and distribute those ratings to the appropriate departments in your company. This includes sales, customer service and data processing. If you revise a customer's credit rating, adjust every department's records accordingly. 

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