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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

In Sundaram Foods Pvt Ltd, the storekeeper receives goods, records them in the stock register, and also authorises the payment vouchers for the same supplies. The internal auditor notes the weakness. Which principle of internal check is violated?

The principle violated is segregation of incompatible duties. Custody of goods, recording in the stock register and authorising payments should be handled by different people, so that one person's work checks another's. When one person does all three, errors or misappropriation can go unnoticed.

  1. ASegregation of incompatible duties such as custody, recording and authorisationCorrect
  2. BRotation of employees between sections
  3. CUse of pre-numbered documents
  4. DFixing of overall budget limits

Explanation

Internal check requires custody of assets, recording of transactions and authorisation to be done by different persons. Here one person handles custody, recording and authorisation, so a fraud or error could go undetected. Rotation, numbering and budgets are other controls but are not the breach described.

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