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The question is “You instruct the audit junior to confirm whether the post is opened by more than one individual. Over which of the following internal control objectives would this provide assurance?”
1) Cash receipts are not misappropriated
2) All cash receipts that occurred are recorded
3) Cash receipts are recorded at the correct amounts in the ledger
4) Cash receipts are posted to the correct receivables accounts and to the general ledgerThe correct answer is – 1 only
Sir, please help explain that why the first statement is the correct one
Thank you
Welcome to my forum – and apologies for the delay in answering as I have been away.
The scenario envisages the receipt of “cash” (cheques, money orders, etc) in the post. If there was only one individual opening the post – they could pocket the cash (and it wouldn’t be recorded). More than one person is a control to deter this. (That doesn’t mean to say that there is no risk whatsoever of misappropriation, because two or more individuals could be in collusion – but that is an “inherent limitation” in any system of internal control.)
In the version of the question I can find the options are:
A 1 only
B 2 only
C 3 and 4
D 1 and 4I guess you are wanting to answer 1 and 2 (although that is not an option). I would justify the answer of 1 only because the mere fact that two people are present does not mean that cash is accurately recorded – although you might expect one person to be recording it, the question and the scenario are silent on who is doing the recording – the cash receipts may be passed to someone else to do the recording.
I wouldn’t worry about it – the original ACCA question did not have multiple choice, so this is adapted. Real ACCA exam OTs have to be more objective/less subjective.
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