ACCA Applied Knowledge · Business and Technology · Internal controls
A company's system refuses to process a purchase order unless the requesting manager has entered a valid budget code. What type of control is this?
This is a preventive control. The system blocks the purchase order before it can be processed without a valid budget code, so the unauthorised or erroneous transaction is stopped before it happens rather than being found or fixed afterwards.
- APreventive controlCorrect
- BDetective control
- CCorrective control
Explanation
The system stops an invalid order from being processed at all, so the error or unauthorised act is stopped before it occurs. That is a preventive control. A detective control would only identify the problem after the order had been processed.
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