ACCA Audit and Assurance (F8) Practice Exam

What does the acronym "Ph.A.S.I.P." stand for in internal controls?

1. Physical and Analytical Systematic Internal Policy

2. Procedures and Audit Standards for Internal Performance

3. Performance and Segregation of Internal Procedures

4. Philosophy of Authorisation, Segregation, Inspection, and Physical controls

The correct answer is: Physical and Analytical Systematic Internal Policy

The acronym "Ph.A.S.I.P." stands for "Philosophy of Authorisation, Segregation, Inspection, and Physical controls." This concept emphasizes key principles in the design and implementation of internal controls within an organization. The philosophy encompasses several important aspects of internal control: - **Authorisation**: Ensures that all financial transactions and processes are approved by appropriate personnel, reducing the risk of fraud and errors. - **Segregation**: Involves dividing responsibilities among different individuals to prevent any single person from having control over all aspects of a transaction, thereby mitigating risks associated with misconduct or oversight. - **Inspection**: Refers to the processes in place to review and verify the accuracy of transactions and other activities, ensuring that there is accountability and ongoing assessment of processes. - **Physical controls**: Involves safeguarding assets through physical barriers, such as locks, security systems, and surveillance, to protect against theft and loss. These components together establish a robust framework for internal control, which is essential for ensuring the reliability of financial reporting and compliance with laws and regulations.