المحاسب الإداري المعتمد الجزء 1 E. Internal Controls

Purchasing controls for a growing events business

Briarline Event Services

Questions: 8 Answered:

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Question of 8 Purchasing controls for a growing events business

Purchasing controls for a growing events business Case-based question

The case

Briarline Event Services provides lighting, staging, and temporary equipment for conferences. It recently integrated two regional offices into a common purchasing platform. A control review identified the following arrangements.

The finance coordinator can create payment batches, release bank transfers, post supplier payments to the ledger, and prepare the bank reconciliation. The procurement lead chooses rental suppliers, approves purchase commitments without the second approval required by company policy, and confirms receipt of the same rentals. The platform does not enforce that approval policy. Neither role receives an independent transaction review.

A temporary finance employee received production-system access before the company completed its required reference and qualification checks. The managing director stopped holding scheduled control reviews after integration and did not name a replacement reviewer. A vendor-spending exception report continued to run, but nobody was assigned to investigate unusual price or volume changes.

Revenue has increased while event margins have declined. The board wants an evidence-based review of controls and transactions; the available facts do not establish that any employee or supplier committed fraud.

Assumptions

Assume bank transfers can be released using the finance coordinator's own credentials without a second authorization.
Receiving confirmation establishes whether the ordered rental equipment arrived in the agreed quantity and condition.
Recommendations should address the observed risks without assuming misconduct or requiring the managing director to perform every transaction.

Which responsibility bundle gives Briarline's finance coordinator the greatest opportunity both to make an unauthorized payment and to conceal it in the records?

Answer Creating payment batches and posting supplier payments to the ledger, while a treasury officer releases transfers and an independent accountant reconciles the bank account. Preparing the monthly bank reconciliation, while other staff create, release, and record the transfers. Creating payment batches and releasing bank transfers, while an independent accountant records them and reconciles the bank account. Releasing bank transfers, recording those transfers, and reconciling the bank account without independent review.

Which proposed change most directly reduces the risk that Briarline pays for rental equipment that the procurement lead ordered but that never arrived?

Answer Require an event-site employee independent of procurement to document receipt, and match that evidence with the approved order and invoice before payment. Require the procurement lead to attach the supplier's delivery note when confirming receipt in the platform. Require the finance coordinator to match each supplier invoice to the approved purchase order before payment. Enforce the policy's second approval in the platform before a purchase commitment is placed.

The board asks whether separating payment duties will make payment fraud impossible. Which response is most accurate?

Answer Yes, provided the company documents the new job descriptions. No. Appropriate separation and review reduce risk, but collusion, override, or human error can still undermine controls. Yes, because two approvers cannot cooperate to approve an improper payment. No. Fraud becomes impossible only when the managing director personally approves every payment.

Select TWO conclusions that the board can draw directly from Briarline's control review.

Select two answers. Selected 0 / 2

Answer The decline in event margins proves that the finance coordinator stole cash. The company must have too many suppliers because no one investigates the spending report. The absence of an assigned reviewer leaves vendor-spending exceptions without an accountable follow-up process. Increased revenue means the purchasing controls are operating effectively. The procurement lead's ability to authorize orders and confirm receipt removes an independent check on the same transaction.

Briarline can assign an independent part-time reviewer but cannot immediately expand the entire finance department. Select TWO changes that most directly reduce the payment risks described.

Select two answers. Selected 0 / 2

Answer Require a second authorized person to approve payment batches using underlying order and receipt evidence before funds are released. Give the coordinator a second user account and require one account for posting and the other for reconciliation. Suspend all supplier payments indefinitely, including amounts already independently verified as due. Have the independent reviewer obtain bank statements directly, review reconciliations, and investigate unusual payments. Increase the coordinator's transfer limit so fewer batches are necessary.

Select THREE principles Briarline should use when redesigning its transaction responsibilities.

Select 3 answers. Selected 0 / 3

Answer A familiar transaction should be reconciled only by the person who released its payment. An independent person should verify the receipt evidence used to support procurement payments. Authorization, access to assets, recording, and independent verification should be separated where practical. Where complete separation is impractical, a documented independent review can reduce the resulting risk. Temporary employees may bypass normal access approval because their assignments are short.

Comparing Briarline's bank statement with its cash ledger and investigating differences is Bank-to-ledger comparison . Completing qualification and reference checks before granting the temporary employee the relevant access is primarily a Pre-access screening control. Assigning responsibility for the abandoned control reviews is an improvement in Review responsibility .

Match each focused observation to the primary deficiency it illustrates. Judge the specific feature emphasized in each row; a wider transaction process may contain additional weaknesses.

The person releasing bank transfers also records them and verifies the same bank balance, with no independent review.

The person ordering rental equipment is also the sole person certifying that it arrived.

The required reference and qualification checks were incomplete when a temporary employee received production-system access.

Scheduled management control reviews stopped and no replacement review owner was appointed.

A purchase commitment can be placed without the second approval required by company policy.

A supplier-spending exception report is generated, but unusual changes are never investigated.

The marks, the correct answers and the explanations appear as soon as the answers are submitted. Unanswered questions earn no marks.

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