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Question 297

One of the goals of the finance department is to ensure payments are made to designated receivers only. For that purpose, the following controls are established:

• The first clerk enters data to initiate a payment transaction to the bank.

• The second clerk compares the payment data entered with the original invoice and ap-proves the disbursement.

• The third clerk prints bank statements weekly and compares them to invoices processed.

What should the internal auditor conclude?

The goal is achieved, because segregation of duties is established in the payment process.

Unauthorized payments can be prevented due to reviews conducted by the third clerk.

There seems to be a lack of controls in the invoice authorization process.

The controls between the first and second clerk need to be strengthened.

Correct Answer: A

The goal of ensuring payments are made to designated receivers only is achieved because segregation of duties is established in the payment process. This segregation, involving three different clerks with separate responsibilities (initiating the payment, approving the disbursement, and reconciling bank statements), decreases the risk of unauthorized payments and ensures a strong control environment.

Discussion

ElvooOption: C

Why C??