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segregation of duties

HHp98d ago

this is qtn of direct controls.

When new equipment is acquired, the finance department classifies the expenditure between assets and expenses, noting the classification on the purchase order. The classification is made with reference to guidelines established by the finance director, who sample checks that the expenditure allocation has been correctly applied.

here i thought this would be a control deficiency bcoz the person setting the guidelines and the person checking whether the guidlienes are same right? both are being done by the finance director himslef. wouldnt this be self review like shoudlnt another official check whether the guidleines are followed?

DDawit7d ago#1

The control here would be that the finance director have set a procedure in which purchases are classified as Asset or expenses. Then the auditor would check whether the personnels are following the controls set by the finance director, the guideline, while recording each purchase transactions.

Segregation of duty being concerned I don't think there is an issue here since the finance director is the one responsible for the financial reporting he set out control that ensures the fairness of the procruement transactions by establishing guidance. Segregation of duty issue occurs if the party performing the procedure is not responsible for the duty and I think the issue here must be management override of control rather than segregation of duty, since if management persues higher earning the probability of ignoring expensed procrument with PPE Nature would be minimal or even more he/she could command staff to post transactions accordingly.

KimKimTutor5d ago#2

@Dawit Thank you for contributing to this post, but please note that as this is a tutor forum, you should leave it for a tutor to respond.

By all means reply to posts on the non-tutor forum https://opentuition.com/forum/acca-forums

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