Question

Fraudulent use of the organization's credit cards is minimized by which of the following internal control procedures?

1) Establishing an organizational policy on the issuance of credit cards to authorized employees.
2) Reviewing the validity of credit card need at executive and operating levels on a periodic basis.
3) Reconciling the monthly statement from the credit card issuer with the submitted copies of the cardholder's charge slips.
4) Subjecting credit card charges to the same expense controls as those used on regular organizational expense forms.

Answer 1

To minimize fraudulent use of credit cards, an organization should establish a policy on credit card issuance, periodically review the validity of credit card need, reconcile monthly statements with charge slips, and subject credit card charges to expense controls.

Step-by-step explanation:

The fraudulent use of the organization's credit cards can be minimized through the implementation of several internal control procedures:

1. Establishing an organizational policy on the issuance of credit cards to authorized employees helps ensure that only responsible individuals have access to the cards.
2. Reviewing the validity of credit card need at executive and operating levels on a periodic basis allows for monitoring and identifying any unauthorized or unnecessary card usage.
3. Reconciling the monthly statement from the credit card issuer with the submitted copies of the cardholder's charge slips provides a cross-check to detect any discrepancies or fraudulent charges.
4. Subjecting credit card charges to the same expense controls as those used on regular organizational expense forms helps enforce accountability and reduce the likelihood of fraudulent activity.