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Task 4 interim 2
- 1. Purchase and Payments FUNCTIO N POTENTIAL MISSTATEMEN T NECESSARY CONTROL POSSIBLE TEST OF OPERATING EFFECTIVENESS INITIALS DATE Requisition ing goods and services Goods may be requisitioned for unauthorised purposes General and specific authorisation procedures Inquire about procedures Preparing purchase orders Purchases may be made for unauthorised purposes Approved purchase requisition for each order Examine purchase orders for approved requisitions Receiving goods Goods received may not have been ordered Incorrect quantities, damaged goods, or incorrect items may be received Approved purchase order for each shipment Receiving clerks to count, inspect and compare goods received with purchase order Examine goods received note for matching purchase order Observe performance by receiving clerks Storing goods received for inventory Stores clerks may deny taking custody of purchased goods Obtain signed receipt upon delivery of goods from Receiving to Stores Inspect signed receipts Approving the invoice Invoices may be recorded for goods not ordered Matching purchase order and goods received note with supplier’s invoice Examine supporting documentation for invoices Recording the liability Invoices may be recorded incorrectly or not recorded Independent check of agreement of prelist against amounts recorded in purchase journal Periodic accounting for pre-numbered goods received notes and purchase orders Periodic performance reviews by management of reports comparing actual asset, payables and expense balances Examine evidence of independent check; reperform independent check Observe procedure; reperform Inquire of management about results of performance reviews; inspect reports
- 3. Trade Payables Errors and irregularities include: 1. Purchases may have been recorded to the wrong account 2. A liability may have been set up for a fictitious company 3. The purchase and liability may have been recorded in the wrong accounting period 4. A purchase or liability may have been omitted 5. Purchases may have been recorded but the merchandise may not been received. Y ES NO COMMENTS Has a purchase requisition to be raised for all purchases? Requisition number is recorded from the purchase requisition. It is necessary to serve the customers clearly. Is the purchase requisition pre- numbered? Necessary to trace the purchase request Has a purchase order to be raised for all purchases? It necessary to be recorded in the books by the account manager Are purchase orders pre- numbered? Purchase orders should be pre-numbered to ensure completeness and identify “missing” orders. Do purchase orders have to be approved? It is required to approved a purchase order before it is sent to the supplier. Are vendor’s monthly statements reconciled to the purchase ledger? To ensure and identify payments you made or discounts from vendor has not passed, or pricing claims and returns that have not yet been credited. Do adjustments to accounts payable require the approval of a responsible official? It is required that adjustments to accounts payable be approved by a responsible official. Are all vendors’ invoices checked for proper pricing, extensions, footings, and terms? Invoices are checked occasionally. Does the company ensure that claims for damaged merchandise are processed promptly? When there is any problem with the delivery, then the goods are returned with the driver and the purchase ledger clerk is informed. Are unmatched invoices, receiving reports, and purchase invoices reviewed periodically? From time to time, the purchase ledger is check right after the sales statement has been received. It is check and should be reconcile if not this will be send back to the Supplier. Are supporting documents reviewed by cheque signers prior to payment? It should be reviewed from Purchase Ledger to the authorization of the payment and before it is signed by the cheque signers. Are supporting documents stamped “cancelled” by the cheque signers? Cheque is passed to the cheque signers together with the supporting documents Are cheques mailed directly by the person signing the cheque and not returned to the preparers? It is returned to the preparers to write in the cash book and post the cheque to the supplier