Question

Which of the following internal control activity is mainly a preventive activity?

A. Internal Auditing

B. Controlling the access to valuable goods

C. Purchase insurance for goods under shipment

D. None of the Above

Answer 1

Correct ansswer is Option - B  Controlling the access to valuable goods

Preventive Controls: are designed to avoid errors or fraud in transactions before they occur. In other words, preventive controls attempt to prevent invalid transactions from being processed and assets from being misappropriated. Although controls should be tailored to an organization’s specific environment, a common example of an effective preventive control is the segregation of duties. The responsibilities of authorizing transactions, recording transactions, reviewing transactions, and maintaining custody of the asset should all be performed by different individuals. Below are examples of preventive controls:

• Segregation of duties.
• Pre-approval of actions and transactions.
• Physical control over assets (i.e. locks).
• Computer passwords and access controls.
• Employee screening and training.