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CS Professional · Internal and Forensic Audit · Special Points relating to Internal Audit in various Entities

During a year-end review at Kalyani Forgings Ltd, the internal auditor observes that raw material issues to the shop floor are made on verbal instructions of the production supervisor, with no written requisition. Which control weakness does this most directly indicate?

The weakness is the absence of authorised material requisition and issue documentation. Materials should leave stores only against a written, approved requisition supported by an issue note. Verbal instructions leave no audit trail and make pilferage or unrecorded consumption hard to detect.

  1. AAbsence of authorised material requisition and issue documentationCorrect
  2. BExcess closing stock of finished goods
  3. CDelay in billing to customers
  4. DIncorrect classification of fixed assets

Explanation

Material should be issued only against an authorised requisition and a store issue note. Verbal issues leave no audit trail and permit pilferage or misuse. The other options relate to different areas and are not shown by the facts.

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