Question

Discuss the importance of a company having proper insurance and bonding its employees.

This questuon is from Financial Manegerial Accounting textbook by Warren. It is about the 7th chapter which is about internal control and cash.

Thanks.

Answer 1

Companies bond employees to protect against employee theft and dishonesty. Bonding provides the company with compensation in cases of property loss due to the acts of an employee. When employees have access to money or valuable property, bonding protects the organization. Companies also bond employees to protect customers in the event of property damage.

Bonds protect organizations from the actions of employees with no direct contact with customers as well. A risk management bond protects the employer against the loss of finances from employees that have direct access to assets such as cash, deeds, securities and checks. When an employee mishandles a company's assets through embezzlement, the loss can cause a company to shut down or fail to meet the financial requirements for daily operations. The risk management bond provides financial resources for the organization.