[miss z MAMA]

NINJA Question –

I came across this question

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the:

A. human resources function from the controllership function.
B. administrative controls from the internal accounting controls.
C. authorization of transactions from the custody of related assets.
D. operational responsibility from the recordkeeping responsibility.

The correct answer is C.

My instinct let me choose C. But I don’t really understand. Can someone please explain to me? Thanks so much!

[ThomasHallberg]

I could be wrong, if so, someone correct me.

I think C is correct because you do not want someone to have the authority to hire a person and at the same time have the ability to pay that person (custody of assets). In this situation, I could hire a fake person, and pay them fraudulently.

[Anonymous]

If you were in charge of hiring, you could “hire” folks that do not really exist, send their paychecks to an external account and take the money.
hence the need for two people to do the differing jobs. One to hire, one to authorize payroll.

Always remember that collusion will always weaken, if not render useless most internal control.

[Giano26]

Authorize – HR department authorizes new hires, pay rate/change, etc.

Custody of Assets – Payroll controls the handling of cash

AUD - 7/2/16 (waiting for score)
REG - 8/26/16
BEC - TBD
FAR - TBD

[miss z MAMA]

thanks very much!

[Author]

Replies