ACCA Applied Knowledge · Business and Technology · Internal controls
A manager reviews a weekly report comparing actual expenses with budget and investigates large differences. Which category of control activity is this?
This is a detective control. Comparing actual expenses with budget and investigating variances happens after the transactions have occurred, so it identifies problems rather than preventing them or automatically correcting them. Corrective action would follow separately.
- APreventive control, as it stops errors from being recorded
- BDetective control, as it identifies problems after they have occurredCorrect
- CCorrective control, as it automatically fixes the errors found
Explanation
Reviewing actual against budget after the expenses have been incurred finds deviations that have already happened, so it is a detective control. It does not prevent the entries being made, and the review itself does not fix errors; any correction would be a separate action.
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