CS Professional · Internal and Forensic Audit · Special Points relating to Internal Audit in various Entities
While auditing a municipal corporation's cash collection counters, an internal auditor notices that the same clerk receives property tax payments, issues receipts and prepares the daily bank deposit. Which control improvement should the auditor recommend first?
The auditor should recommend segregating the duties of receiving cash, recording receipts and depositing collections, supported by independent reconciliation. One person handling all three can misappropriate and conceal funds. Printing more receipt books or substituting a senior officer does not remove the incompatible duties.
- AIncrease the number of receipt books printed
- BSegregate the duties of receiving cash, recording receipts and depositing collections, with independent reconciliationCorrect
- CReplace the clerk with a more senior officer performing all three tasks
- DConduct a physical verification of furniture at the counter
Explanation
The key weakness is concentration of incompatible duties, which enables misappropriation to be concealed. Segregation and independent reconciliation of receipts to deposits address it. A senior officer performing all tasks leaves the same weakness.
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