Question

Billy Jo is responsible for custody of the finished goods in the warehouse. If his company wishes to maintain strong internal control, which of the following responsibilities are incompatible with his primary job?

A) He is also responsible for the company's fixed asset control ledger.
B) He is responsible for receiving of goods into the warehouse.
C) He is responsible for the accounting records for all receipts and shipments of goods from the warehouse.
D) He is responsible for issuing goods for shipment.

Answer 1

The incompatible responsibility for Billy Jo, who has custody of the finished goods, is handling the accounting records for receipts and shipments, as it conflicts with the internal control principle of segregation of duties.

Step-by-step explanation:

The situation described relates to the principles of internal control within a company, specifically the separation of duties. Billy Jo is in charge of the custody of the finished goods in the warehouse. To maintain strong internal control, it is necessary to segregate responsibilities to prevent a single individual from having control over all aspects of a transaction, as this can lead to potential fraud or errors going undetected.

Consequently, the incompatible responsibility for Billy Jo would be option C: 'He is responsible for the accounting records for all receipts and shipments of goods from the warehouse'. This answer involves both the custody of assets and the recording of the transactions related to these assets, which should not be vested in the same individual to prevent opportunities for fraud or unintentional misstatements.