Skip to content

ACCA Applied Knowledge · Business and Technology · Internal controls

During a review, an internal auditor finds that purchase orders are raised and approved by the same employee. Which action in the audit report is most appropriate?

The auditor should report the weakness and recommend segregating the raising and approving of purchase orders, agreeing an implementation timetable with management. Taking over approval would compromise independence, and leaving the finding out because no loss has occurred ignores the risk of fraud or error.

  1. ARecommend segregation of duties between raising and approving orders, and agree a timetable with management for implementationCorrect
  2. BInstruct the employee to stop immediately and take over approval of orders until the issue is resolved
  3. COmit the finding from the report if no loss has yet been identified

Explanation

The weakness is a lack of segregation of duties. Internal audit should report it with a recommendation and agree management's response and timing. Taking over approval would compromise independence, and omitting a weakness because no loss has yet occurred ignores the risk of fraud or error.

Did you get it right without looking?

One question tells you little. A timed set on Internal controls shows your real accuracy, how long you take and where you lose marks.

Practise Internal controlsFree diagnostic mock

More Internal controls questions