Separation of Duties Prevents Fraud

Steps:

• Identify the purpose of control accounts: they reconcile subsidiary ledgers like sales ledger to the general ledger.
• Recognize that preparing the control account involves summarizing and verifying totals from the sales ledger.
• Understand internal controls: key principle is segregation of duties to reduce risk of errors or fraud by one person.
• Conclude that assigning different staff ensures independent verification, deterring manipulation.

Why A is correct:

• Segregation of duties, a fundamental internal control principle, requires different individuals to handle record-keeping and reconciliation to prevent fraudulent alterations.

Why the others are wrong:

• B: Error location is a benefit but not the primary reason for different staff; audits handle this.
• C: Instant totals come from the ledger itself, not from staff separation.
• D: Financial statements use audited totals; speed isn't tied to who prepares the control account.

Final answer: A