Reference no: EM132702231

1. The ABC Company, a client of your firm, has come to you with the following problem. it has three clerical employees who must perform the following functions:
a. Maintain the general ledger
b. Maintain the accounts receivable ledger
c. Issue credits on returns and allowances
d. Reconcile the bank account
e. Handle and deposit cash receipts

Assuming equal abilities among the three employees, the company asks you to assign the five functions to them to maximize internal control. Assume that these employees will perform no accounting functions other than the ones listed.

Problem 1: Explain the concept of adequate segregation of accounting duties. List four possible unsatisfactory pairings of the functions. Discuss and using life examples to support your decisions.

1. General ledger - cash receipts.
2. Accounts receivable ledger - cash receipts.
3. Bank reconciliation - cash receipts.
4. Credits on returns and allowances - cash receipts.