Fraud is more difficult if the same person collects cash, prepares the bank deposit, or records the receipts in the general ledger.

Fraud is more difficult if the same person collects cash, prepares the bank deposit, or records the receipts in the general ledger.

• A. True
• B. False
• C. It depends
• D. Not sure

Answer: (B)

Separation of duties is a key internal control that reduces fraud risk by dividing cash handling, deposits, and recording receipts among different people. When one person collects cash, prepares the bank deposit, and records the receipts in the general ledger, there’s no independent check to catch misappropriation or errors, making it much easier to divert funds and cover it up. Having different individuals perform these steps creates a system of checks and balances—one person’s work can be reviewed and reconciled by someone else, and discrepancies are more likely to be noticed. Therefore, the idea that fraud is more difficult when a single person handles all three tasks is false; the opposite is true, and separating duties lowers the opportunity for fraud.

Separation of duties is a key internal control that reduces fraud risk by dividing cash handling, deposits, and recording receipts among different people. When one person collects cash, prepares the bank deposit, and records the receipts in the general ledger, there’s no independent check to catch misappropriation or errors, making it much easier to divert funds and cover it up. Having different individuals perform these steps creates a system of checks and balances—one person’s work can be reviewed and reconciled by someone else, and discrepancies are more likely to be noticed. Therefore, the idea that fraud is more difficult when a single person handles all three tasks is false; the opposite is true, and separating duties lowers the opportunity for fraud.