ACCA Applied Knowledge · Business and Technology · Accounting and finance functions within business organisations
Which of the following is a reason why a business might separate the roles of recording transactions and authorising payments within its finance function?
Separating recording from authorising payments reduces the risk of error and fraud through segregation of duties. No single person controls a transaction end to end, so irregularities are easier to detect. It does not replace external audit or set accounting policy.
- ATo reduce the risk of error and fraud through segregation of dutiesCorrect
- BTo ensure that all transactions are recorded using the same accounting policy
- CTo allow the finance function to operate without external audit
- DTo enable the treasury function to forecast cash flows more accurately
Explanation
Segregation of duties means no single person controls a transaction from authorisation through recording, so errors and fraud are more likely to be detected. It does not remove the need for external audit, and it does not by itself set accounting policies or improve cash forecasting.
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