Question

Sometimes companies require that a Purchase Requisition document be prepared and approved in connection with the Expenditure (purchases and cash disbursement) transaction cycle. What threat does requiring and processing this document mitigate?

a) Fraud

b) Errors

c) Unauthorized purchases

d) Misstatements

Answer 1

Requiring a Purchase Requisition mitigates the threat of unauthorized purchases, serving as a control mechanism to ensure necessary and authorized expenditure in a business.

Step-by-step explanation:

When companies require a Purchase Requisition be prepared and approved within the Expenditure transaction cycle, the main threat this process mitigates is c) Unauthorized purchases. The requisition document serves as a control mechanism to ensure that purchases are made only when necessary and that they are properly authorized before any expenditure is incurred. By having a formal process in place, businesses can prevent employees from buying goods or services that are not approved or necessary for business operations, which can lead to overspending or fraudulent transactions.