10.
8
Recommendation
Control
Noted Control strength to correct
weakness
weakness
1. Routine purchases are User A purchase The receiving
initiated by inventory authorization order copy report is prepared
control notifying the means the right should not be after an
purchasing department of materials used as a independent
the need to buy goods. The qualities will be receiving count and
purchasing department fills ordered. The use report unless identification.
out a prenumbered purchase of prenumbered the quantities
order and gets it approved purchase orders have been
by purchasing manager. The allows all POs to blanked out.
original of the five-part be accounted for.
purchase order goes to the
vendor. The order four
copies are for purchasing,
the user department,
receiving for use as a
receiving report and
accounts payable.
2. For efficiency and The user/ Both the user and
effectiveness, purchase of purchaser may the purchasing
specialized goods and not be trained agent should be
services are negotiated in purchasing involved in
directly between the user technique and negotiating with
department and the vendor. could be the company
Company procedures overcharges in The purchasing
require that the user the department
department and the transaction. should approve
purchasing department It increases orders before the
approve invoices for any the potential purchase, not
specialized goods and for collusive before payment
services before making agreements. is made.
payment.
3. Accounts payable maintains Failure to Update the list as
a list of employees who properly soon as a change
have purchase order maintain the in purchase
approval authority. The list list of authorization
was updated two years ago authorized occurs.
and is seldom used by signatories Payables cleck
accounts payable clecks renders id should be
useless. required to use
the list
4. Prenumbered vendor Numbering and Failure to A periodic
invoiced are recorded in an recording process follow-up on review and
invoice register that establishes good open invoices follow-up of all
indicates the receipt date, control over indicated an open items.
whether it is a special order, invoices and ineffective
when a special order is sent helps ensure their control due to
to the requesting department recording a lack of
for approval and when it is accounting follow-up
returned. A review of the records.
register indicated that were
seven open invoices for
special purchases, which
had been forwarded to
operating departments for
approval over 30 days
previously and had not yet
been returned
5. Prior to making entries in The transaction
accounting records, the audit helps
accounts payable cleck minimize errors
checks the mathematical and helps ensure
accuracy of the transaction, that only properly
makes sure that all authorized
transactions are properly transactions are
documented and obtains recorded
departmental approval for
special purchase invoices
6. All approved invoices are Paying Approved,
dilled alphabetically. monthly on unpaid invoices
Invoices are paid on the 5th only the 5th or should be filed
and 20th of each month, and 20th prevents by payment due
all cash discounts are taken payment of date first and
regardless of the terms. any invoice then
due on alphabetically
another date. Pay suppliers on
Taking or before the
unearned cash discount date.
discounts Lost discounts
causes should be
additional analyzed for
paperwork cause and future
when disputed avoidance.
by suppliers
and creates
animosity.
This policy
may lead to
fewer
discounts
being offered
7. The treasurer signs the Proper separation
checks and cancels the of duties exists
supporting documents. Requiring
An original document is original
required for a payment documents and
to be processed cancelling them
after payment
reduces duplicate
payments
8. Prenumbered blank Proper protection Unlimited A policy limiting
checks are kept in a of blank checks access to cash access to and
locked safe accessible disbursement physical
only to the cash documents protection of
disbursements permits accounts payable
department. Other unauthorized documents and
documents and records alteration of records should be
maintained by the payables established and
accounts payable section documents. monitored
are readily accessible to This could
all persons assigned to result in a loss
the section and to others of control, a
in the accounting loss of
function. accountability
or a loss of
assets – as
well as
improper or
inaccurate
accounting or
destruction of
records.
