CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions
During an internal audit of the stores department of Kaveri Engineering Ltd, the auditor finds that the same storekeeper receives goods from suppliers, records them in the stock ledger and issues them to the production floor. Which control weakness is most directly indicated?
The weakness is lack of segregation of duties. When one storekeeper receives, records and issues stock, nobody independently checks him, so errors or theft can stay hidden. Good stores control separates custody of goods from record keeping and authorisation of issues.
- ALack of segregation of duties between custody and record-keepingCorrect
- BExcessive use of perpetual inventory counts
- COver-reliance on standard costing
- DAbsence of a sales return policy
Explanation
One person handles physical custody of stock and also maintains its records, so errors or misappropriation can go undetected. Proper control separates custody, recording and authorisation. Perpetual counts and standard costing are not the weakness here, and a sales return policy is unrelated to stores handling.
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