[Section A] In a company's payroll department, the employee who calculates the monthly wages is also the only person authorized to approve the final bank transfers to employees' accounts. Which fundamental internal control principle is being violated here?

Answer options:

Physical controls

Segregation of duties

Information processing controls

Human resource controls

How to approach this question

Identify the risk: one person has too much power over a complete transaction cycle.

Full Answer

B.Segregation of duties✓ Correct

Segregation of duties is a primary internal control intended to prevent fraud and error. By ensuring that no single individual has control over all phases of a transaction (authorization, execution, custody, and recording), the company forces collusion to occur if fraud is to be committed.

Common mistakes

Confusing segregation of duties with authorization. While authorization is involved, the specific error is that the *same* person is doing both steps.

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