Question

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LIVIUM I U ULPLUI. 22 Explain how the principle of separation of duties is violated in each of the following situations. Also, suggest one or more procedures to reduce the risk and exposure high- lighted in each example. 1 1 1 Loubo bod quit the

Answer 1

i) It is the duty of the accounts payable clerk to take care of payable invoices and payment. But he should not be allowed to participate in any transactions from a company in which he or his relative have any financial relationship. This is to ensure that he is an independent accountant. He might try to manipulate the invoice to receive more payments from this company to his company. Thus the duties should be allocated with due care to avoid any conflict of interest.

j) The authority of any purchase return should be delegated to the purchase inspection department or the stores department. The cashier should not be allowed to create any purchase return unless it is approved by the concerned department. This is a violation of duties as he is allowed to performed a task in which the next step is under his control. So he may not required permission from others and take undue advantage.

k) The selection of vendors is done on the basis of quotation by the purchasing agent . If he has the fully authority to select the vendor then he will prefer that vendor which gives him some commission or persnel benefit. Thus the vendor suggested by the purchasing agent must be cross examined and approved by the purchasing officer of the company to avoid risk of poor purchasing.

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