Question

Which of the following situations represents an internal control weakness?

1) Timekeeping is independent of the payroll department.
2) Paychecks are distributed by the employees' immediate supervisor.
3) Time cards are reconciled with job tickets.
4) Personnel is responsible for updating employee records, including creation of records for new hires.

Answer 1

The internal control weakness is the distribution of paychecks by the employee's immediate supervisor; this situation could lead to conflicts of interest and undermine the principle of segregation of duties. Thus, the option 2 is the correct answer.

Step-by-step explanation:

The situation that represents an internal control weakness is that paychecks are distributed by the employee's immediate supervisor. This practice can lead to potential conflicts of interest, risk of manipulation or theft, and challenges in enforcing segregation of duties, which is a key component of effective internal control systems. Proper separation of responsibilities is critical to prevent and detect errors or fraud. While the other options listed demonstrate good internal control practices by ensuring separation of duties and reconciliation of records, the distribution of paychecks by a supervisor does not adequately safeguard against the misappropriation of assets or conflict of interest scenarios.