Final answer:
Segregation of duties most effectively prevents fraud by separating order entry and cash receipts within an organization; this creates a check and balance system by ensuring no individual controls all aspects of a financial transaction.
Step-by-step explanation:
Segregation of duties is a key internal control that helps to prevent fraud and errors in the financial operations of an organization. It involves separating tasks and responsibilities to ensure that no single individual has control over all aspects of any financial transaction. This reduces risks of errors and fraud.
When examining the options provided:
- a. billing and accounts receivable
- b. treasury and controllership
- c. sales and accounts receivable
- d. order entry and cash receipts
the segregation of duties is
most clearly accomplished
by separating
order entry and cash receipts
(option d). This separation ensures that the person who processes orders (order entry) is not the same person who handles the cash or payments received (cash receipts), which creates a system of checks and balances.
Modern businesses, such as restaurants and larger entities like a manufacturing factory or a hospital, divide tasks across various job classifications to delineate responsibilities and prevent overlaps that could lead to inefficiency or malpractice. For instance, in a restaurant, separate individuals are responsible for cooking, serving, greeting, cleaning, and managing finances.