CS Professional · Internal and Forensic Audit · Emerging Issues and Challenges
During a procurement review, an internal auditor at Bharat Textiles Ltd notices that the purchase manager approves vendor invoices and also maintains the vendor master file. Which fraud-risk factor does this situation most directly illustrate?
The situation shows a lack of segregation of duties. When the same person approves invoices and maintains the vendor master file, that person can create fake vendors and authorise payments to them, so incompatible functions must be separated to reduce fraud risk.
- ALack of segregation of dutiesCorrect
- BExcessive board independence
- COver-reliance on external audit
- DAbsence of a whistle-blower policy
Explanation
One person controlling both the vendor master and invoice approval can create fictitious vendors and pay them without detection. This is a classic segregation-of-duties weakness. The other options are not shown in the facts given.
Did you get it right without looking?
One question tells you little. A timed set on Emerging Issues and Challenges shows your real accuracy, how long you take and where you lose marks.
More Emerging Issues and Challenges questions
- Prakash Steels' internal audit team uses an analytics tool and finds a 98% match between employee bank accounts and vendor bank accounts for…
- An internal auditor at Deccan Retail Ltd finds that several vendor payments are just below the Rs 50,000 approval threshold, issued to diffe…
- Which control most effectively limits the damage to Ganga Foods Ltd if ransomware encrypts its production file server?
- After a ransomware attack, Narmada Pharma Ltd restored operations from backups but the internal auditor found the restoration took 6 days ag…
- Under a continuous auditing set-up at Bharat Logistics Ltd, the internal audit team has configured automated rules that flag exceptions in t…
- Sundaram Textiles Ltd's internal audit head notices that the audit committee has stopped receiving her reports directly; they now pass throu…