Question

In a system of proper internal controls, the same employee should not be allowed to:

A. Sign checks and cancel the supporting voucher package.
B. Receive goods and prepare the related receiving report.
C. Prepare voucher packages and sign checks.
D. Initiate purchase requisitions and inspect goods received.

Answer 1

Where an employee should not be allowed to both prepare voucher packages and sign checks. This separation prevents one person from having the authority to both execute and conceal fraud or errors, thus fostering effective internal controls. The correct answer is option C.

Step-by-step explanation:

In a system of proper internal controls, the principle of segregation of duties is key to preventing fraud and errors. This principle dictates that no single employee should have control over all aspects of any significant transaction.

This prevents any one individual from being in a position to both perpetrate and conceal errors or fraud in the normal course of their duties.

Thus, the correct answer to the question is option C, which states that the same employee should not prepare voucher packages and sign checks.

This is because the person who prepares the voucher, which authorizes payment, should not be the same person who ultimately has the authority to release the payment (signing the check), as this could lead to a situation where fraudulent or erroneous payments are made without detection. The correct answer is option C.