Q.A trading firm authorises payments as follows: the accounts clerk who prepares a payment voucher also signs the cheque and hands it directly to the payee, with no one else reviewing the transaction. As a student of auditing, identify the internal check weakness in this arrangement and suggest how it should be corrected, with reference to internal check for cash payments. (This is supplementary practice content, building the fuller apply-the-rule reasoning the SAQ/Descriptive formats of the real paper cannot test.)

Allowing the same clerk to prepare and sign a payment removes the independent authorisation step that internal check for payments specifically relies on.

The weakness. A sound internal check for cash payments requires, at minimum, that the person who authorises a payment, the person who prepares it, and the person who signs/releases it are not all the same individual (Section e). In this firm, a single accounts clerk both prepares the voucher AND signs the cheque, with no independent authorisation step and no second signatory — meaning that clerk could, in principle, create a payment voucher for a non-existent or inflated expense and pay it out entirely unchecked, since no other person's approval or signature is required at any stage.

How it should be corrected, applying the standard cash-payments checklist:

1. No payment without prior authorisation: every payment voucher must first be approved by a designated senior official (e.g. the proprietor or a manager), supported by proper evidence (an invoice, a purchase order, a receipt) — approval must come BEFORE payment, never be assumed after the fact.
2. Segregate the functions: ideally, the person who prepares the payment voucher, the person who authorises it, and the person who signs the cheque should be three different individuals; at an absolute minimum, authorisation and signing must never rest with the same person who also prepared the voucher.
3. Two signatories above a threshold value: for payments above a specified amount, require two authorised signatories on the cheque, so no single individual can release a large payment alone.
4. Prefer cheque/bank transfer over cash wherever practicable, since it creates an independent, bank-verified record of the payment. …