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ACCA Strategic Professional · Strategic Business Leader · Internal control and management reporting

Vantage Pharma's directors discover that sales staff were overstating orders to hit bonus targets. They change the commission scheme to reward cash collected rather than orders booked, and they re-train the team on expected conduct. Which type of control best describes the change to the commission scheme?

It is best described as a preventive control. Paying commission on cash collected rather than orders booked removes the incentive to overstate orders, so the problem is addressed before it arises. It does not detect existing errors, limit physical access or correct past misstatements.

  1. AA preventive control addressing an incentive that drives the behaviourCorrect
  2. BA detective control because it identifies overstated orders after the event
  3. CA physical control restricting access to order records
  4. DA purely corrective control that repairs the previous year's misstatements

Explanation

Altering the reward basis removes the incentive to overstate orders, so it acts before the behaviour occurs and is preventive. It does not search for existing errors, restrict physical access or correct prior figures. It also supports the control environment through reinforced expected conduct.

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