CS Professional · Internal and Forensic Audit · Internal Controls
Internal auditor of Kaveri Steels Ltd finds that the monthly bank reconciliation is prepared by the accountant who also has authority to sign cheques. Which recommendation best strengthens the control?
The best fix is to give the reconciliation to an independent employee who neither signs cheques nor records cash, with senior review. The conflict of the same person authorising payments and checking the bank balance is then removed, which a limit, frequency change or leave rule would not do.
- AHave the accountant sign cheques only for amounts below a limit
- BIncrease the frequency of the reconciliation to weekly by the same accountant
- CAssign the reconciliation to an employee with no cheque-signing or cash-recording role, and have it reviewed by a senior officialCorrect
- DRequire the accountant to take annual leave
Explanation
The reconciliation is an independent check on cash records and should be done by someone not handling cash or signing cheques, with supervisory review. A limit or higher frequency by the same person leaves the conflict in place. Leave rotation is helpful but does not remove the conflict.
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