Equipment acquisitions that are misclassified as maintenance expense most likely would be detected by an internal control activity that provides for:

Question

Quizplus · Accepted Answer

Choice "C" is correct. Equipment acquisitions that are misclassified as maintenance expense most likely would be detected by internal control procedures that provide for investigation of variances within a formal budgeting system. Choice "A" is incorrect. Segregation of duties of employees in the accounts payable department would not prevent the misclassification of equipment acquisitions as maintenance expense. Choice "B" is incorrect. Verifying invoices for disbursements already recorded as equipment acquisitions would not include examining invoices for disbursements recorded as maintenance expense. Choice "D" is incorrect. Since the authorization by the board of directors occurs before the disbursement is recorded, this control would not prevent any misclassification.

Equipment Acquisitions That Are Misclassified as Maintenance Expense Most Likely