Several controls are used to safeguard inventory, and one of those is to:

• A. Permit unrestricted access to inventory for all employees.
• B. Separate the duties of receiving and recording inventory.
• C. Allow the same employee to handle both purchasing and receiving.
• D. Store inventory records in an unsecured location.

Answer: (B)

Verified step by step guidance

1. Understand the purpose of internal controls: Internal controls are designed to safeguard assets, ensure accurate financial reporting, and promote operational efficiency. In the context of inventory, controls help prevent theft, fraud, and errors.
2. Analyze the options provided: Review each option critically to determine which aligns with the principles of effective internal controls. For example, permitting unrestricted access to inventory for all employees increases the risk of theft or mismanagement.
3. Focus on segregation of duties: Segregation of duties is a key principle in internal controls. It involves dividing responsibilities among different employees to reduce the risk of errors or fraud. For inventory, separating the duties of receiving and recording inventory ensures that no single employee has complete control over the process.
4. Evaluate the other options: Allowing the same employee to handle both purchasing and receiving creates a conflict of interest and increases the risk of fraud. Similarly, storing inventory records in an unsecured location compromises the security of sensitive information.
5. Conclude that the correct control is to separate the duties of receiving and recording inventory: This approach minimizes risks and ensures accountability in inventory management.