Which of the following is a good internal control mechanism for cash disbursements? Multiple Choice Maximum purchase limits set on debit and credit cards. Expenditures above a particular amount do not need authorization. All checks need to be signed only by one authorized person. All transactions are made using cash with the required documentation.

Question

Business

Kobe Arellano

21 August, 19:31

Which of the following is a good internal control mechanism for cash disbursements? Multiple Choice Maximum purchase limits set on debit and credit cards. Expenditures above a particular amount do not need authorization. All checks need to be signed only by one authorized person. All transactions are made using cash with the required documentation.

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Answers (1)

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Rohan Aguilar · Answer 1

The correct option is that maximum purchase limits set on debit and credit cards

Explanation:

It is clearly wrong to ignore authorization for expenditures above a particular threshold, because that encourages employees to perpetrate fraud. It would be more appropriate to say expenditures above a particular limit requires authorization.

When one person signs all checks, the implication of that is a company where the authorizer is allowed to use his wisdom to make cashflow decision that could adverse effect even on the survival of the business.

Documentation of all transactions is good but using cash at all times exposes the business to the risk of cash conversion and theft