What is the purpose of proper authorization of transactions?

What is the purpose of proper authorization of transactions?

• A. Automating approvals after posting
• B. Ignoring authorization for small amounts
• C. Ensuring that transactions are approved by the appropriate authority before processing
• D. Allowing any staff to approve as needed

Answer: (C)

Proper authorization serves as an internal control that ensures every transaction is reviewed and approved by the person or level with the authority before it is processed. This gatekeeping helps catch errors, prevents unauthorized or fraudulent spending, and ensures compliance with policies and budgets. It creates an auditable trail and assigns accountability so decisions follow the organization’s rules. The best answer captures this idea by emphasizing that transactions should be approved by the appropriate authority before processing. Approving after posting would bypass oversight and leave the organization vulnerable to mistakes or misuse. Ignoring authorization for small amounts still weakens control, and letting any staff approve as needed eliminates accountability and undermines safeguards.

Proper authorization serves as an internal control that ensures every transaction is reviewed and approved by the person or level with the authority before it is processed. This gatekeeping helps catch errors, prevents unauthorized or fraudulent spending, and ensures compliance with policies and budgets. It creates an auditable trail and assigns accountability so decisions follow the organization’s rules.

The best answer captures this idea by emphasizing that transactions should be approved by the appropriate authority before processing. Approving after posting would bypass oversight and leave the organization vulnerable to mistakes or misuse. Ignoring authorization for small amounts still weakens control, and letting any staff approve as needed eliminates accountability and undermines safeguards.