ACCA Applied Knowledge · Business and Technology · Internal controls
Marlow Co's accounting system rejects any purchase order above $5,000 unless a manager's electronic approval code has first been entered. Which type of control is this?
This is a preventive control. The system blocks orders over $5,000 until a manager's approval code is entered, so unauthorised purchases cannot be processed at all. A detective control would only identify unapproved orders after they had been raised, rather than stopping them.
- ADetective control
- BCorrective control
- CPreventive controlCorrect
- DCompensating control
Explanation
The system blocks the order before it is processed unless approval exists, so unauthorised large orders cannot proceed. This stops the problem occurring, which makes it preventive. A detective control would instead report unapproved orders after they were placed.
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