Which of the following is an example of poor internal control in an organization?

• A. Allowing the same employee to both authorize and record transactions
• B. Requiring two signatures on checks above \$10,000
• C. Segregating duties among different employees
• D. Conducting regular independent audits

Answer: (A)

Verified step by step guidance

1. Understand the concept of internal control: Internal control refers to the processes and procedures implemented by an organization to ensure the accuracy and reliability of financial reporting, safeguard assets, and comply with laws and regulations.
2. Identify the principle of segregation of duties: Segregation of duties is a key internal control principle that ensures no single employee has control over all aspects of a financial transaction. This reduces the risk of errors or fraud.
3. Analyze the options provided: Evaluate each option to determine whether it aligns with good internal control practices. For example, requiring two signatures on checks above \$10,000 and conducting regular independent audits are examples of strong internal controls.
4. Focus on the option that violates internal control principles: Allowing the same employee to both authorize and record transactions is an example of poor internal control because it violates the segregation of duties principle, increasing the risk of fraud or errors.
5. Conclude the analysis: Based on the evaluation, the correct answer is the option that represents poor internal control practices, which is 'Allowing the same employee to both authorize and record transactions.'