A company employs three accounts payable clerks and one treasurer. Their responsibilities are as follows:

Employee Reviews
Clerk 1 Review vendor invoices for proper signature approval.
Clerk 2 Enters vendor invoice into the accounting system and verifies payment terms.
Clerk 3 Posts entered vendor invoices to accounts payable ledger for payment and mails checks.
Treasurer Review the vendor invoices and signs each check.
Which of the following would indicate a weakness in the company's internal controls?

Question

A company employs three accounts payable clerks and one treasurer. Their responsibilities are as follows:

Employee	Reviews
Clerk 1	Review vendor invoices for proper signature approval.
Clerk 2	Enters vendor invoice into the accounting system and verifies payment terms.
Clerk 3	Posts entered vendor invoices to accounts payable ledger for payment and mails checks.
Treasurer	Review the vendor invoices and signs each check.
Which of the following would indicate a weakness in the company's internal controls?

BlackTom AI · Accepted Answer

Question restatement: A company has three accounts payable clerks and one treasurer with distinct duties, and we are to identify a weakness in internal controls based on the described setup.
Option 1: Clerk 1 opens all of the incoming mail. This is a potential control weakness because opening mail could reveal invoices, remittance advices, or sensitive information before proper segregation or verification occurs. In many internal-control frameworks, mail-opening should be performed by someone who is not involved in processing payments to prevent misappropriation or tampering, so this practice raises red flags about confidentiality and segregation of duties.
Option 2: The treasurer uses a stamp for signing checks. Using a signature stamp can be a control weakness because it may enable unauthorized or unverified payments if the stamp is misused or not properly supervised. In solid internal-control environments, checks should be signed by an authorized person after independent verification, and witnessing or dual controls are often recommended to prevent forging or circumvention.
Option 3: Clerk 2 reconciles the accounts payable ledger with the general ledger monthly. Regular reconciliation between the AP ledger and the general ledger is a sound control activity that helps detect errors, duplicate payments, or missing entries. While not ideal to do only monthly (more frequent would be better), this activity by itself is generally a positive control rather than a weakness, assuming proper authorization and independence.
Option 4: Clerk 3 mails the checks and remittances after they have been signed. This arrangement is problematic because the same person who posts invoices ( Clerk 3) also handles mailing the checks and remittances after signing. This creates an opportunity for misappropriation of funds or fake disbursements since there is insufficient separation between authorization, execution, and custody of checks. In a strong control environment, mailing duties and check issuance should be separated from authorization and recording.
In summary, the core issue across the options is the level of segregation of duties and the potential for unauthorized payments. Among the choices, Option 4 directly describes a process that collapses critical internal-control principles by combining signing, posting, and mailing into the same workflow, which can enable theft or concealment. The other options identify less severe or more common control practices (or, in the case of Option 3, a reasonable reconciliation activity) that do not imply the same level of weakness as Option 4.

ACG442_A_2025SPRING Auditing Ch06 Practice Quiz

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