Which of the following internal control activities most likely would deter lapping of collections from customers?
A)Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries.
B)Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval.
C)Separation of duties between receiving cash and posting the accounts receivable ledger.
D)Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.

Question

Quizplus · Accepted Answer

Lapping occurs when a fraudulent employee takes money from one customer's account and then takes money from another customer's account to cover the theft. Separation of duties between receiving cash and posting the accounts receivable ledger would create a system of checks and balances, making it more difficult for one employee to manipulate both functions and carry out this type of fraud. The other internal control activities listed may help prevent other types of fraud but are not specifically designed to prevent lapping of collections.

Which of the Following Internal Control Activities Most Likely Would