Skip to content

ACCA Applied Knowledge · Business and Technology · Internal controls

In a small retailer, the same employee orders inventory, receives the goods into the warehouse and approves the supplier invoice for payment. Which risk is MOST directly increased by this arrangement?

The greatest risk is payment for goods that were never ordered or received going undetected. When one employee orders, receives and approves invoices, no independent person checks that the purchase was genuine, so fictitious or inflated purchases can be paid.

  1. APayment for goods never ordered or received, going undetectedCorrect
  2. BInventory being stored at the wrong temperature
  3. CCustomers receiving incorrectly priced goods
  4. DSales being recorded in the wrong accounting period

Explanation

Ordering, receiving and invoice approval are incompatible duties. One person controlling all three could create fictitious orders or invoices and approve payment with no independent check. The other risks are not primarily caused by this combination of purchasing duties.

Did you get it right without looking?

One question tells you little. A timed set on Internal controls shows your real accuracy, how long you take and where you lose marks.

Practise Internal controlsFree diagnostic mock

More Internal controls questions