Choose the code letter of the best internal control principle that is related to the problem described:
-The person who is authorised to sign cheques approves purchase orders for payment.
A) Establishment of responsibility
B) Segregation of duties
C) Physical, mechanical, and electronic control devices
D) Documentation procedures
E) Independent internal verification
F) Other controls

Question

Quizplus · Accepted Answer

Segregation of duties is crucial to prevent fraud and errors. This principle dictates that no single individual should control all aspects of a financial transaction. If the person authorized to sign cheques also approves purchase orders, it creates a conflict of interest and increases the risk of fraud. Separating these tasks among different individuals or departments helps ensure checks and balances within the system.

Choose the Code Letter of the Best Internal Control Principle