ACCA Applied Knowledge · Business and Technology · Internal controls
An internal auditor at Marlow Co is reviewing the purchasing cycle. She finds that purchase orders over a set value are authorised by one manager, who also approves the supplier invoices for payment. Which is the most appropriate recommendation within her report?
The auditor should recommend segregating duties so that one person authorises purchase orders and another approves invoices for payment. The current arrangement lets a single manager commit and pay without independent check, which creates a risk of error or fraud. Replacing the person or removing limits would not fix this.
- AReplace the manager and recruit a new employee to do both tasks
- BSegregate the duties so that different people authorise orders and approve invoices for paymentCorrect
- CRemove the authorisation limit so orders are processed faster
- DAsk the external auditors to take over the review of the purchasing cycle
Explanation
The weakness is lack of segregation of duties, which allows error or fraud to go undetected. Internal audit should recommend separating authorisation of orders from approval of payments. Replacing the person leaves the weakness, and removing limits worsens control.
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