The internal control process that requires the segregation of the authorization of purchase returns and the accounts payable record keeping and the custody of inventory, will help to minimize the risk of:
A)Incorrect amounts
B)Fictitious returns
C)Timing issues
D)Duplicate returns

Question

Quizplus · Accepted Answer

By separating the authorization of purchase returns from accounts payable record keeping and custody of inventory, it reduces the risk of fictitious returns being recorded in the accounts. This is because the person who has custody of the inventory can easily create a fictitious return and authorize it to be recorded in accounts payable. However, segregation of duties ensures that different people handle each stage of the process, making it harder for fraudulent activities to occur. It does not necessarily address the risks of incorrect amounts, timing issues, or duplicate returns.

The Internal Control Process That Requires the Segregation of the Authorization