ACCA Applied Knowledge · Business and Technology · Internal controls
A firm has only three accounts staff. The accounts clerk records receipts and also opens the post containing cheques from customers. Management cannot afford extra staff. Which compensating control would be MOST effective in reducing the risk of cheques being diverted?
The most effective compensating control is for another employee to list cheques when the post is opened and for a supervisor to agree that list to banking and receivables postings. This creates an independent check where full segregation of duties is not affordable.
- AAnother employee lists cheques on opening the post and a supervisor later agrees the list to bank paying-in records and receivables postingsCorrect
- BIncreasing the clerk's salary to reduce temptation
- CRequiring the clerk to take a longer lunch break
- DHaving the clerk write a monthly report on the quality of the post
Explanation
Where full segregation is impractical, independent checking acts as compensation. An independent list of cheques received, agreed by a supervisor to banking and ledger postings, would reveal diversion. A higher salary or irrelevant tasks do not create an independent check, so they are ineffective as controls.
Did you get it right without looking?
One question tells you little. A timed set on Internal controls shows your real accuracy, how long you take and where you lose marks.
More Internal controls questions
- Which of the following is the main purpose of segregation of duties within an internal control system?
- A manager reviews a weekly report comparing actual expenses with budget and investigates large differences. Which category of control activi…
- Dorian plc's board is deciding whether to outsource its internal audit function to a firm of accountants rather than keep it in-house. Which…
- Which of the following is an example of an operational (value for money) internal audit assignment, as opposed to a financial audit?
- Which of the following best describes a preventive control in a business's internal control system?
- Which of the following is a fraud prevention measure, as opposed to a fraud detection measure?