ACCA Applied Knowledge · Business and Technology · Internal controls
A company requires that any purchase order above $10,000 is signed by a department head, and above $50,000 by a director. Which type of control activity is this?
This is an authorisation control. Requiring a department head to approve orders above $10,000 and a director above $50,000 sets approval limits linked to transaction value, so larger commitments get more senior scrutiny before the company is committed.
- AAuthorisation limitsCorrect
- BPhysical access control
- CReconciliation control
- DArithmetic accuracy check
Explanation
Setting approval levels that depend on the value of a transaction is an authorisation control. It ensures that larger commitments receive more senior scrutiny. It is not about restricting physical access, reconciling records or checking calculations.
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