Steve Ramos owns apartment buildings in Baguio City, and Tagaytay City.

Each property has a manager who collects rent, arranges for repairs, and runs

advertisements in the local newspaper. The property managers transfer cash

to Ramos monthly and prepare their own bank reconciliations. The manager

in Baguio City has been stealing large sums of money. To cover the theft, he

understates the amount of the outstanding checks on the monthly bank

reconciliation. As a result, each monthly bank reconciliation appears to

balance. However, the balance sheet reports more cash than Ramos actually

has in the bank. In negotiating the sale of the Baguio City property, Ramos is

showing the balance sheet to prospective investors.

Required:

1. Identify two parties other than Ramos who can be harmed by this theft. In what ways can they be harmed?

2. Discuss the role accounting plays in this situation.