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CS Professional · Internal and Forensic Audit · Internal Controls

At Bharat Steels Pvt Ltd, the same employee raises purchase orders, receives goods and authorises supplier payments. An internal auditor reviewing this would most appropriately say the weakness relates to which feature of a sound internal control system?

The weakness is a lack of segregation of duties. One person handles ordering, receipt of goods and payment authorisation, so no independent check exists, and errors or fraud can be committed and concealed without detection. Separating these functions among different employees is a basic feature of sound internal control.

  1. ALack of segregation of dutiesCorrect
  2. BExcessive documentation
  3. COver-reliance on external confirmation
  4. DToo frequent physical verification

Explanation

Authorisation, custody and recording or execution functions should be split among different people so that no one can commit and conceal errors or fraud. Combining ordering, receiving and payment in one person removes this check, which is a segregation-of-duties failure.

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