ExpertMedium2 marksMultiple Choice
ACCA · Question 15 · Business functions, regulation and technology
In a fully automated fintech application, the system automatically approves micro-loans based on an AI credit score. However, a human compliance officer must manually review and authorize any loan exceeding $10,000. Furthermore, the compliance officer does not have the system permissions to alter the AI's scoring algorithm. What internal control principle is primarily being demonstrated here?
In a fully automated fintech application, the system automatically approves micro-loans based on an AI credit score. However, a human compliance officer must manually review and authorize any loan exceeding $10,000. Furthermore, the compliance officer does not have the system permissions to alter the AI's scoring algorithm. What internal control principle is primarily being demonstrated here?
Answer options:
A.
Physical controls
B.
Segregation of duties
C.
Arithmetic and accounting controls
D.
Management controls
How to approach this question
Notice that the power to authorize a large loan is separated from the power to change the underlying algorithm. This prevents a single person from committing and concealing fraud.
Full Answer
B.Segregation of duties✓ Correct
Segregation of duties is a fundamental internal control. By ensuring the compliance officer cannot change the AI algorithm, the company prevents a scenario where an employee could lower the credit threshold and then approve fraudulent loans to themselves.
Common mistakes
Choosing Management controls because a 'compliance officer' is involved. The specific *mechanism* is segregation.
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