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ACCA Applied Knowledge · Business and Technology · Financial systems and technology

Halden plc's finance director wants to reduce the risk of fraud in the purchasing process. Currently the same accounts clerk raises purchase orders, records goods received and authorises supplier payments. Which action would most directly address the weakness, and why?

Separating the duties of ordering, receiving goods and authorising payment among different people is the best action. The weakness is a lack of segregation of duties, which lets one clerk commit and hide fraud. Splitting the tasks means collusion would be needed, whereas self-checking is not independent.

  1. ASeparate the duties of ordering, receiving and authorising payment among different staff, so no one person controls a whole transactionCorrect
  2. BAsk the same clerk to check their own work more often so errors are detected sooner
  3. CReplace the clerk with an external auditor who performs the tasks annually
  4. DIncrease the number of purchase orders raised so that unusual items are less obvious

Explanation

The weakness is lack of segregation of duties, allowing one person to initiate, record and approve a transaction and conceal fraud. Splitting the tasks forces collusion for fraud to succeed. Self-checking is not independent, and an auditor cannot perform operational tasks without losing independence.

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