Question

Your review of the accounting system at your audit client, Western Plains Ltd, identified the following procedures:

1. The accounts payable clerk prepares all cash payment vouchers, which are then approved by the chief financial officer and then posted to the ledger by the accounts payable clerk.
2. The sales clerk prepares all invoices for customers, which are then approved by the credit officer once supporting documentation has been provided for the orders and amounts.
3. All mail is opened by the company receptionist. Any cheques received are forwarded to the accounts receivable clerk for processing.
4. When processed, the cheques received are given to the junior accountant for banking on a daily basis.
5. Bank statements are received on a weekly basis and are reconciled by the accounts payable clerk.

1) Identify any instances of a lack of segregation of duties.

Answer 1

Solution :

The accounts payable clerk is responsible for :

(i) Preparing the cash payment vouchers

(ii) Posting entries in the ledger

(iii) Preparing bank reconciliation

​​​From the above it is clear that the accounts payable clerk has full control over the cash payments & any fraud or error made by him will be concealed in the bank reconciliation which is also prepared by him.

Therefore, seggregation of duties is missing in this case. The accounts payable clerk should be made responsible only to prepare the cash payment vouchers to seek approval, the posting in ledger should be carried out another accounting clerk and the bank reconciliation should be pepared by the senior accountant.