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ACCA Applied Knowledge · Business and Technology · The impact of advances in technology

A firm automates its expense-claim process so that claims below a set limit are approved automatically, with a random sample reviewed by a manager afterwards. Which statement about this arrangement is most accurate?

Automatic approval with a later sample review replaces a preventive control with a detective one for claims below the limit. Claims are paid before checking, so problems are only identified afterwards. The arrangement still needs control, does not automatically correct errors, and cannot prevent every invalid claim being submitted.

  1. AIt replaces preventive control with a detective control for claims below the limitCorrect
  2. BIt removes the need for any internal control over expenses
  3. CIt is a corrective control because it fixes errors automatically
  4. DIt is an input control that stops all invalid claims being submitted

Explanation

Automatic approval means claims are no longer checked before payment, so prevention is lost for small claims. The after-the-event sample review is detective, identifying problems once they have occurred. It does not remove the need for control, does not correct errors itself, and cannot stop all invalid submissions.

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