Reference no: EM133526149

Case: Segregation of duties is critical to effective internal control; it reduces the risk of both erroneous and fraudulent actions. In general, the approval function, the accounting/reconciling function, procurement duties and the custody of assets should be separated among employees. When these functions cannot be separated, a detailed supervisory review of related activities is required as a compensating control activity. Segregation of duties is a deterrent to fraud because it requires collusion with another person to perpetrate a fraudulent act.

This definition is provided by the University of Edinburgh and the practice of segregating duties has been introduced into procure-to-pay (P2P) processes by organisations to safeguard against fraudulent activities.

American Airlines wishes to buy up to 20 supersonic planes from aircraft manufacturer Boom Supersonic, a relatively new competitor in the industry, based on the growing demand for carbon-neutral travel solutions. Boom's 'Overture' promises to revolutionise air travel.

Based on your understanding of the P2P process and the benefits of cross-functional sourcing teams, recommend the composition of the team (team members/ departments) and the contribution each will make to effectively reduce the risk of errors or fraud for each of the following stages.
Stage 2 - Need clarification/Requisition (5 marks)
Stage 3 - Supplier Identification/Selection (5 marks)
Stage 4 - Approval/Contract/PO Generation (5 marks)
Stage 5 - Receive Material and Documents (5 marks)
Stage 6 - Settle, Pay and Measure Performance (5 marks)