Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 2

Which of the following internal control weaknesses would an auditor most likely detect while reviewing a flowchart that depicts the purchasing function of an organization?

Answer options

• A. Purchasing policies have not been updated.
• B. The organization is not taking advantage of quantity discounts available from its suppliers.
• C. Payments for goods received have not been authorized at the appropriate level.
• D. Payments to suppliers are made before goods are received.

Correct answer: D

Explanation

The correct answer is D because it indicates a significant control risk where payments are processed prior to receiving goods, which can lead to fraud or errors. Options A, B, and C, while they may reflect weaknesses in purchasing practices, do not present as immediate risks to the integrity of the payment process as option D does.