Exam CISA topic 1 question 407 discussion

The greatest segregation of duties (SoD) conflict arises when one person is responsible for both receiving goods and making payments for them. This creates a significant opportunity for fraud, such as: Falsely recording the receipt of goods that were never delivered Approving payment for those nonexistent goods Circumventing detection by manipulating both processes Why the other options are less critical: A. Vendor selection and statements of work 🔹 These can present risk, but payments are still processed independently, offering some control. B. Invoices and reconciliations 🔹 While this has risk, it's typically detected through internal audit or secondary review functions. C. Purchase requisitions and purchase orders 🔹 This could lead to procurement without proper approval but doesn't directly lead to payment or loss of funds without further collusion.

The combination of goods receipts (confirming that goods or services have been received) and payments (authorizing payment for those goods or services) presents the greatest risk because the individual could: Fabricate receipt of goods or services that were never delivered. Approve payments for fraudulent or non-existent transactions.

Three way match. D only

While invoices and reconciliations (Option B) also involve important financial processes, separating these tasks does not inherently create the same level of conflict as goods receipts and payments. In the case of goods receipts and payments, the potential for misuse or abuse of authority is more pronounced due to the direct link between receiving goods and authorizing payments.

Answer: C the person authorizing purchase orders should not be the same individual who initiated the requisition.

While Option A represents a segregation of duties concern, Option D presents a greater conflict because it involves both the physical handling of inventory and the financial control over payments, thereby posing a higher risk of fraud or misappropriation. Therefore, Option D is considered to have the GREATEST segregation of duties conflict.

D. Goods receipts and payments

D. Goods receipts and payments

Invoices and reconciliations present a segregation of duties conflict if the same individual who performs the related tasks also has approval authority because they can manipulate the invoicing and reconciliation process for personal gain. The individual may approve fraudulent invoices, alter the amounts on invoices, or misstate the reconciliation to hide discrepancies. Segregation of duties is a fundamental principle of internal control that aims to minimize the risk of fraud and error by dividing critical financial and operational responsibilities among different individuals. By separating the tasks of reconciling invoices from the authority to approve them, it becomes more difficult for a single individual to commit fraud or make an error without detection.

B, it s finance concerns. for SoD. fraund is more critical and must be fully concern

should be B