Mel O' Conner owns rental properties in Mighigan. Each property has a manager who collects rent, arranges for repairs, and runs adverstisments in the local newspaper. The property managers transfers cash to O'Conner monthly and prepare their own bank reconciliations. The manager in Lansing has been stealing from the company. To cover the theft, he understands the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconiliation appears to balance. However, the balance sheet reports more cash than O'Conner actually has in the bank. O'Conner is currently putting his entire business up for sale. In negotiating the sale of the business, O'Conner is showing the balance sheet to prospective buyers.
- Identify who, other than O'Conner, could be harmed by this theft. In what ways could they be harmed?
- Discuss the role accounting plays in this situation.