Final answer:
C) Have a mandatory vacation policy for employees who both handle cash and enter cash receipts into the system.
To prevent a reoccurrence of a lapping problem, the best protection is establishing strong internal controls, particularly by separating duties so no employee has access to both incoming checks and cash, thereby minimizing the opportunity for fraud.
Step-by-step explanation:
The best protection for a company that wishes to prevent a reoccurrence of a "lapping" problem with trade accounts receivable is to implement strong internal controls. Lapping is a form of fraud that involves altering the records of cash receipts to steal cash and cover up the theft by using subsequent cash receipts to account for the missing funds. To address this issue, the following options are considered:
- Separate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail.
- Separate duties so that no employee has access to both checks from customers and currency from daily cash receipts.
- Have a mandatory vacation policy for employees who both handle cash and enter cash receipts into the system.
- Request that customer's payment checks be made payable to the company and addressed to the treasurer.
Among these options, choice B) Separate duties so that no employee has access to both checks from customers and currency from daily cash receipts, is particularly effective.
This approach ensures that the responsibilities for handling and recording cash are divided among different employees, which decreases the opportunity for a single individual to perpetrate lapping fraud without detection.