[lz221476]

I always have hard time to clear those job segregation.

If internal control is properly designed, the same employee should not be permitted to:

a. Sign checks and cancel supporting documents.

b. Prepare disbursement vouchers and sign checks.

c. Initiate a request to order merchandise and approve merchandise received.

d. Receive merchandise and prepare a receiving report.

Answer is b. So what is voucher? Who is usually responsible for prepare disbursement vouchers? Is treasurer usually managing money and signing check? Are treasurer and accountants working in different apartment? Also why “c“ wasn’t right? I am totally confused about those stuff. They are driving me nuts now!

[HeartsMimiCPA]

Remember ARC.

C isn't correct because initiating a request isn't Authority, Reporting, Custody. Someone would still have to approve the request.

B. is Authority and Custody. Vouchers are “packages” that contain all supporting documents for disbursements, they have to be approved before they are usually passed along to the authorized check signer. I believe disbursement packages are prepared by AR and are then sent to the Treasurer.

AUD - 65, 89!
REG - 70, 89!
FAR - 78!
BEC - 77!

Finally!
Experience 06/30/15
Ethics-Done

VA Licensed 09/15/15

[HeartsMimiCPA]

Remember ARC.

C isn't correct because initiating a request isn't Authority, Reporting, Custody. Someone would still have to approve the request.

B. is Authority and Custody. Vouchers are “packages” that contain all supporting documents for disbursements, they have to be approved before they are usually passed along to the authorized check signer. I believe disbursement packages are prepared by AR and are then sent to the Treasurer.

AUD - 65, 89!
REG - 70, 89!
FAR - 78!
BEC - 77!

Finally!
Experience 06/30/15
Ethics-Done

VA Licensed 09/15/15

[M.O.D.]

A voucher is a multiple-purpose term. In this case it is an accounting document representing an internal intent to make a payment to an external entity, such as a vendor.

https://en.wikipedia.org/wiki/Voucher

The AICPA does not do a good job with segregation of duties. The IMA is better.

There are 4 duties not 3:

Authorization: (these are the people who run the traditional depts: purchasing, sales, HR; they initiate the transaction, an no one else should have this power. It can also describe senior management or the Board of Directors)

Recording: this is the accounting function which journalizes the transaction of someone else; depts are AR, AP, payroll

Custody: they hold the company's physical assets: warehouse inventory control for physical goods, and treasurer for financial assets such as checks and check signature blocks, and bank accounts and securities. Note that the treasury should be the only people with any access whatsoever to the company's money, not accounting, under any circumstance.

And yes, treasurers are not accountants. Treasurers hold the money, accountants record the transactions with the money but should not have access to the money because they could cover up the financial transaction.

This is the best explanation of the organizational division and chart:

https://worldacademyonline.com/article/24/338/controller_versus_treasurer.html

Reconciliation (this is new to me, not having been covered by financial accounting) These are internal auditors (or hired external auditors) who make period checks such as bank reconciliations and take inventory. They should not have been involved in the original transaction or have custody of the product, so it cannot be accounting since they recorded the original transaction. They are described as the General Ledger group.

So, make an outline for every answer to help you see:

a. Signs checks (treasurer), cancels supporting docs, vouchers to approve payment (recording, accounting initiates this but treasurer usually cancels after payment. This is ok because the treasurer is only canceling docs, not making docs. so he cannot do any damage.)

b. Prepare disbursement vouchers (handling accounting documents, accounting), signs checks (treasurer, because it involves handing money)

c. Initiate order merchandise (authorization function, production or purchasing), receive and approve merch (custody function: inventory control, warehouse, engineering)

d. receive merch (custody function, inventory control), prepare receiving report (recording, the warehouse could do this, but it is ok because it does not do any damage. He should have “blind” copy without qty or prices and all he does is confirm what was received. Because he has no power to alter beyond this, it is ok)

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[M.O.D.]

A voucher is a multiple-purpose term. In this case it is an accounting document representing an internal intent to make a payment to an external entity, such as a vendor.

https://en.wikipedia.org/wiki/Voucher

The AICPA does not do a good job with segregation of duties. The IMA is better.

There are 4 duties not 3:

Authorization: (these are the people who run the traditional depts: purchasing, sales, HR; they initiate the transaction, an no one else should have this power. It can also describe senior management or the Board of Directors)

Recording: this is the accounting function which journalizes the transaction of someone else; depts are AR, AP, payroll

Custody: they hold the company's physical assets: warehouse inventory control for physical goods, and treasurer for financial assets such as checks and check signature blocks, and bank accounts and securities. Note that the treasury should be the only people with any access whatsoever to the company's money, not accounting, under any circumstance.

And yes, treasurers are not accountants. Treasurers hold the money, accountants record the transactions with the money but should not have access to the money because they could cover up the financial transaction.

This is the best explanation of the organizational division and chart:

https://worldacademyonline.com/article/24/338/controller_versus_treasurer.html

Reconciliation (this is new to me, not having been covered by financial accounting) These are internal auditors (or hired external auditors) who make period checks such as bank reconciliations and take inventory. They should not have been involved in the original transaction or have custody of the product, so it cannot be accounting since they recorded the original transaction. They are described as the General Ledger group.

So, make an outline for every answer to help you see:

a. Signs checks (treasurer), cancels supporting docs, vouchers to approve payment (recording, accounting initiates this but treasurer usually cancels after payment. This is ok because the treasurer is only canceling docs, not making docs. so he cannot do any damage.)

b. Prepare disbursement vouchers (handling accounting documents, accounting), signs checks (treasurer, because it involves handing money)

c. Initiate order merchandise (authorization function, production or purchasing), receive and approve merch (custody function: inventory control, warehouse, engineering)

d. receive merch (custody function, inventory control), prepare receiving report (recording, the warehouse could do this, but it is ok because it does not do any damage. He should have “blind” copy without qty or prices and all he does is confirm what was received. Because he has no power to alter beyond this, it is ok)

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[stoleway]

@lz221476

Basic principles for segregation of duties is the use of the ABC mnemonic

A- Approval

B- Bookkeeping or Recording

C- Custody

In a large company, these 3 elements should be performed by separate individuals or department. There will be a breakdown of internal control if one person is performing 2 of these duties at the same time.

So what is voucher?

In this context, a voucher can be considered as an invoice. AP receives invoice and process it for payment. AP performs the recording function.

Who is usually responsible for prepare disbursement vouchers?

AP, CONTROLLER, ACCOUNTANT. They perform recording function.

Is treasurer usually managing money and signing check?

Yes, treasurer, cfo and cashier performs the custodial function. They also sign and cancel checks.

Are treasurer and accountants working in different apartment?

yes, they work in different departments.

C is wrong because you cannot intiate a request and approve it yourself. Thats why we have purchasing and receiving department.

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[stoleway]

@lz221476

Basic principles for segregation of duties is the use of the ABC mnemonic

A- Approval

B- Bookkeeping or Recording

C- Custody

In a large company, these 3 elements should be performed by separate individuals or department. There will be a breakdown of internal control if one person is performing 2 of these duties at the same time.

So what is voucher?

In this context, a voucher can be considered as an invoice. AP receives invoice and process it for payment. AP performs the recording function.

Who is usually responsible for prepare disbursement vouchers?

AP, CONTROLLER, ACCOUNTANT. They perform recording function.

Is treasurer usually managing money and signing check?

Yes, treasurer, cfo and cashier performs the custodial function. They also sign and cancel checks.

Are treasurer and accountants working in different apartment?

yes, they work in different departments.

C is wrong because you cannot intiate a request and approve it yourself. Thats why we have purchasing and receiving department.

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[lz221476]

@M.O.D

“c. Initiate order merchandise (authorization function, production or purchasing), receive and approve merch (custody function: inventory control, warehouse, engineering)” I totally agreed with that. I thought the same employee shouldn't authorize and approve purchase, so I chose “C”. But the right answer is “B”

Also this is what I googled: “The person who requisitions the purchase of goods or services should not be the person who approves the purchase”.(https://www.yale.edu/auditing/balancing/segregation_duties.html)

hmm, I am still confused…

[lz221476]

@M.O.D

“c. Initiate order merchandise (authorization function, production or purchasing), receive and approve merch (custody function: inventory control, warehouse, engineering)” I totally agreed with that. I thought the same employee shouldn't authorize and approve purchase, so I chose “C”. But the right answer is “B”

Also this is what I googled: “The person who requisitions the purchase of goods or services should not be the person who approves the purchase”.(https://www.yale.edu/auditing/balancing/segregation_duties.html)

hmm, I am still confused…

[M.O.D.]

@lz

They are asking a risk question. Which is riskiest? Almost always cash/money is riskiest because of the ease with which it can be converted to personal goods. An employee might be able to steal expensive heavy machinery but what good would it do him?

For purchasing, the flow is requisition (in production usually) sends to purchasing to shop around for the best price. So the requisitioning dept (and it could be HR needing copy paper) and the purchasing are separate departments.

Then it is received by the receiving dept, counted, etc.

Then engineering might inspect it

Then inventory dept would store it (custody).

So requisitioning could approve (and should approve) that the correct merchandise (what they really wanted) was received.

The question throws me off because of the word “receive” which indicates the receiving function, which should be a separate function.

But if the receiving function was already completed by the receiving dept, then yes, they could call the original requistioner and ask if this is really what he ordered, and approve it.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[M.O.D.]

@lz

They are asking a risk question. Which is riskiest? Almost always cash/money is riskiest because of the ease with which it can be converted to personal goods. An employee might be able to steal expensive heavy machinery but what good would it do him?

For purchasing, the flow is requisition (in production usually) sends to purchasing to shop around for the best price. So the requisitioning dept (and it could be HR needing copy paper) and the purchasing are separate departments.

Then it is received by the receiving dept, counted, etc.

Then engineering might inspect it

Then inventory dept would store it (custody).

So requisitioning could approve (and should approve) that the correct merchandise (what they really wanted) was received.

The question throws me off because of the word “receive” which indicates the receiving function, which should be a separate function.

But if the receiving function was already completed by the receiving dept, then yes, they could call the original requistioner and ask if this is really what he ordered, and approve it.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[M.O.D.]

@lz

It was nice studying with you. I am logging off for 1-2 weeks to take my exam.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[M.O.D.]

@lz

It was nice studying with you. I am logging off for 1-2 weeks to take my exam.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[lz221476]

@M.O.D

Thanks for your help! good luck!

[lz221476]

@M.O.D

Thanks for your help! good luck!

[Author]

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