CIMA BA4 · Chapter 7 · Question 9 of 10
A company's purchase ledger clerk can set up new suppliers, approve invoices and make payments. Which risk is greatest and which control would best address it?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Payments to fictitious suppliers; segregate supplier set-up, approval and payment between different staff
Explanation
When one person controls the whole purchasing and payment cycle, they could create a fictitious supplier and pay it without detection. Segregating supplier set-up, authorisation and payment is the key control. The other options address unrelated risks in the sales, inventory and non-current asset cycles.
More Internal control, risk and audit MCQs
- Q1Which of the following is NOT one of the five components of internal control in the COSO framework?
- Q2Who is ultimately responsible for a company's system of internal control?
- Q3Requiring two separate people to authorise and record a payment is an example of which type of control?
- Q4Which of the following best describes the 'control environment'?
- Q5Which of the following is a key difference between internal audit and external audit?