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ACCA Strategic Professional · Strategic Business Leader · Internal control and management reporting

At Marlow Retail, the finance director discovers that the same employee can create new suppliers, approve invoices and release payments. No fraud has been found. Which weakness does this most directly represent, and what is the most appropriate control response?

This is a lack of segregation of duties, because one employee controls supplier creation, invoice approval and payment. The proper response is to separate these incompatible functions among different people, or add independent review where that is not possible, so that fraud or error would be detected.

  1. ALack of segregation of duties; separate the incompatible functions or add independent reviewCorrect
  2. BLack of monitoring; appoint an external consultant to review the budget
  3. CPoor information systems; upgrade the accounting software to a cloud platform
  4. DWeak risk appetite; require every transaction to be approved by the board

Explanation

One person controlling creation, approval and payment means errors or fraud could go undetected. Segregating duties, or adding independent review where staff numbers are small, addresses it. Board approval of every transaction is impractical and does not target the root weakness.

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