Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 34

An auditor for a large wholesaler is evaluating the controls over the approval and oversight of credit sales. Which of the following procedures would be a control weakness?

Answer options

• A. The credit department is responsible for approving shipments to all customers.
• B. The finance committee of the board of directors periodically reviews credit standards.
• C. Customers who fail to meet credit requirements must pay cash for shipments upon delivery.
• D. The sales department is responsible for determining the credit ratings of customers.

Correct answer: D

Explanation

Option D represents a control weakness because allowing the sales department to determine credit ratings could lead to conflicts of interest and biased evaluations. In contrast, options A, B, and C involve appropriate oversight and separation of duties that help maintain effective controls over credit sales.