ACCA Strategic Professional · Strategic Business Leader · Management and internal control systems
Zenith Retail plc's board notices that store managers can raise purchase orders, approve supplier invoices and authorise payments for their own stores. Which internal control component is most directly weakened by this arrangement?
Segregation of duties is weakened. When one manager raises orders, approves invoices and authorises payments, no independent check exists, so errors or fraud can go undetected. This is a failure of control activities, not of monitoring, market risk assessment or shareholder communication.
- ASegregation of duties within the control activitiesCorrect
- BMonitoring through internal audit reviews
- CRisk assessment of external market conditions
- DInformation and communication to shareholders
Explanation
One person controls the initiation, approval and payment stages of the purchasing cycle, so no independent check exists. This is a failure of segregation of duties, a core control activity. Monitoring and external reporting do not address the root weakness of combined incompatible duties.
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