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Question 671 - IIA-CIA-Part1 discussion

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Which of the following controls would most likely prevent fraud related to the overpayment of vendors?

A.

Require supervisory review of all invoices and cash disbursements exceeding a stated threshold.

Answers
A.

Require supervisory review of all invoices and cash disbursements exceeding a stated threshold.

B.

Require the matching of a purchase order, receiving report, and invoice before payment.

Answers
B.

Require the matching of a purchase order, receiving report, and invoice before payment.

C.

Require all checks to be signed by more than one person.

Answers
C.

Require all checks to be signed by more than one person.

D.

Require all invoices to be paid within 30 days by check only.

Answers
D.

Require all invoices to be paid within 30 days by check only.

Suggested answer: B

Explanation:

Requiring the matching of a purchase order (PO), receiving report, and invoice before payment is a robust control designed to prevent overpayment and other types of fraudulent activities related to vendor payments. This control ensures that:

The goods or services invoiced were actually ordered (verified by the purchase order).

The goods or services were received (verified by the receiving report).

The invoice amount matches the agreed-upon terms and quantities (verified by the invoice).

This three-way match process helps prevent discrepancies such as overpayments, duplicate payments, or payments for goods/services not received. By ensuring all three documents align, it mitigates the risk of fraud and errors in vendor payments.

The Institute of Internal Auditors (IIA) Standards and Practice Advisories.

COSO Internal Control -- Integrated Framework, specifically on control activities.

'Internal Auditing: Assurance & Advisory Services' by IIA, Chapter on Procurement and Accounts Payable Controls.

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asked 03/11/2024
stefano nicoletti
35 questions
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