Answer (D) is correct . Recording of cash establishes accountability for assets. The bank reconciliation compares that recorded accountability with actual assets. The recording of cash receipts and preparation of bank reconciliations should therefore be performed by different individuals since the preparer of a reconciliation could conceal a cash shortage. For example, if a cashier both prepares the bank deposit and performs the reconciliation, (s)he could embezzle cash and conceal the theft by falsifying the reconciliation.
Answer (A) is incorrect because There is no conflict between writing off bad debts (accounts receivable) and reconciling accounts payable, which are liabilities.
Answer (B) is incorrect because Distribution of payroll checks and approval of sales returns are independent functions. People who perform such disparate tasks are unlikely to be able to perpetrate and conceal a fraud. In fact, some companies use personnel from an independent function to distribute payroll checks.
Answer (C) is incorrect because Posting both ledgers would cause no conflict as long as the individual involved did not have access to the actual cash. If a person has access to records but not the assets, there is no danger of embezzlement without collusion.
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