CS Professional · Internal and Forensic Audit · Internal Controls
At Sharma Textiles Ltd, the cashier who receives customer cheques also prepares the bank deposit slip and posts the receipts in the cash book. Which basic internal control principle is most clearly violated?
Segregation of duties is violated. One cashier handles receipt, recording and deposit of cheques, so that person can commit and conceal misappropriation. Internal control requires these incompatible functions to be split among different people so that one person's work checks another's.
- ASegregation of dutiesCorrect
- BAuthorisation limits
- CPhysical safeguarding of inventory
- DPeriodic budget review
Explanation
Receiving cash, recording it and depositing it are incompatible functions that should sit with different people. When one person does all three, errors or misappropriation can go unnoticed. Budget review and inventory safeguards do not address this weakness.
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