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CS Professional · Internal and Forensic Audit · Internal Controls

During an internal audit of Sharma Textiles Ltd, the auditor finds that the same accounts officer raises purchase orders, receives goods and approves supplier payments. In evaluating internal control, which weakness does this chiefly show?

The weakness is lack of segregation of duties. When one officer raises orders, receives goods and approves payments, no independent check exists over the purchase cycle, so errors or fraud can occur and remain undetected.

  1. ALack of segregation of dutiesCorrect
  2. BExcessive documentation of transactions
  3. COver-reliance on external confirmations
  4. DAbsence of an annual budget

Explanation

One person controls authorisation, custody and recording or payment stages of the purchase cycle. This removes the check one person provides on another and enables errors or fraud to go unnoticed. The other options do not describe the facts given.

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