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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

During an internal audit of Kaveri Appliances Ltd, the auditor finds that the same sales executive who accepts customer orders also approves customer credit limits and raises dispatch instructions. Which control weakness is most directly indicated?

The weakness is lack of segregation of duties. When the same person accepts orders, approves credit and instructs dispatch, no independent check exists, so fictitious sales, excess credit to favoured customers or errors can occur and go undetected within the sales cycle.

  1. ALack of segregation of duties in the order-to-dispatch cycleCorrect
  2. BAbsence of a physical inventory count
  3. CInadequate depreciation policy for showrooms
  4. DDelay in filing of GST returns

Explanation

One person handling order acceptance, credit approval and dispatch instruction can commit or conceal errors and fraud, such as fictitious orders or credit given to favoured parties. The other options relate to inventory counts, fixed assets and statutory filings, which are not the issue described.

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