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During the year, it was discovered that a payroll clerk had been setting up fictitious employees on the payroll system with the wages being paid into the clerk’s own bank account. This clerk has subsequently left the company but you are concerned that additional frauds may have taken place in the wages department due to a lack of adequate and effective internal controls.
Which of the following additional controls is most effective at preventing fraud of this type occurring again?
1. An exception report should be generated when standing data is changed in the payroll system which is reviewed by the payroll manager
2. On a regular basis department managers should be given a list of employees for their department from the payroll system to check
3. The people working in the payroll department should not be related
4. The finance director should compare the total payroll cost each month to prior month
to identify significant differenceseven after two guesses i would have not guessed that the right answer was option 3! There’s absolute no mention of 2 people colluding to perpetuate this fraud, so then why is the answer option 3 ma’am?
I thought options 1 and 2 made good deal sense, but my kit seems to suggest that they will detect fraud only after it has occurred! I find this ludicrous!! everywhere in control recommendations throughout the IC section B questions we suggest the 1st method, only to know the control is a toothless tiger!
can you pls explain maam why 3 is right and 1 and 2 are wrong?
This control (3) is a standard one in many businesses – not only to not have family members in the same department – but not to have family members in the same organisation – sometimes not even quite remote ones like cousins (!) So if this would be implemented as an additional control it means it’s not something that happening already – and this should be recommended.
However, as you point out, there is nothing to suggest that “this type” had anything to do with collusion so 3 doesn’t leap out as the correct answer. You therefore have to go with the justification as given – the “key” to selecting the correct answer is to find the control that prevents occurrence of a fraud – not that detects it later.
I suggest you should focus on real ACCA OT-case questions – and if looking for additional ones you will find two sets of 3 OT-case questions on this page https://opentuition.com/acca/aa
And also on the same page, when you’re ready, a “Revision Mock Exam Section A”.
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