ACCA Applied Knowledge · Business and Technology · Internal controls
A payroll clerk with sole control of the employee master file adds a fictitious employee and directs the salary to their own bank account. Which control would be MOST effective in both preventing and detecting this specific fraud?
The best control is independent HR approval of new starters combined with periodic comparison of payroll to HR records by someone outside payroll. This separates duties, preventing the clerk adding ghost employees alone and detecting any that appear. Passwords or an annual audit would not reliably address this risk.
- AAnnual external audit of the financial statements
- BIndependent HR approval of new starters, with periodic reviews of payroll against HR records by someone outside payrollCorrect
- CIncreasing the clerk's salary to reduce financial pressure
- DUse of password protection on the payroll software only
Explanation
The fraud is a ghost employee scheme enabled by one person controlling master data. Independent HR authorisation of starters prevents unapproved additions, and independent comparison of payroll with HR records detects any that slip through. An external audit is not designed to find all fraud, and passwords alone do not stop an authorised user.
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