At Sprocket Co, a single purchasing clerk raises purchase orders, records supplier invoices in the payables ledger and prepares supplier payments for signature. What is the main risk created by this arrangement?

Correct answer: D) Fictitious suppliers could be set up and paid without detection because of a lack of segregation of duties

Explanation

When one person controls ordering, recording and payment, they could create a fictitious supplier, record false invoices and arrange payment without another person being involved. Segregation of these duties means that collusion would be needed. The other risks relate to sales, payroll and non-current assets, not the purchases cycle.