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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

During a review of the purchase function at Kaveri Foods Pvt. Ltd., the internal auditor finds that the same officer raises purchase orders, receives goods and approves supplier invoices for payment. What is the most appropriate recommendation reflecting the internal auditor's role?

The internal auditor should recommend segregating ordering, receiving and payment approval among different persons. The finding is a control weakness, and internal audit's role is to evaluate controls and advise improvements, not to perform management functions such as approving invoices or to presume fraud.

  1. ASegregate the duties of ordering, receiving and payment approval among different personsCorrect
  2. BReplace the officer immediately and report him to the police
  3. CAsk the statutory auditor to qualify the financial statements
  4. DTake over the approval of supplier invoices personally

Explanation

The weakness is a lack of segregation of duties, which is an internal control gap. The internal auditor evaluates controls and recommends improvements. Taking over approval would be an operational responsibility and would impair independence, and no fraud has yet been established to justify police action.

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