Purchases & Payments: Internal Controls
Ordering department
Risks
Production delays
Loss of potential sales
Customer dissatisfaction
Unauthorised requisitioning of raw materials
Incorrect items ordered
Failure to identify need to purchase
Control Procedures
Requisition/order should be authorised by senior staff member
Copy of requisition filed in numerical sequence in requisition dept.
Order cross-referenced to requisition
Inappropriate suppliers/prices
Receiving
Risks
Items not ordered are accepted/recorded as inventory
Items received are stolen after being recorded as inventory
Goods are received but not recorded
Goods of inferior quality or damaged goods are accepted
Quantities received are inaccurately recorded on GRN
Controls
Receiving dept. provided w/ copy of POs
GRN made out only for items accepted
Receiving clerks checks description & quantity
Test of condition
Obtain signature of supplier delivery staff to all alterations of SDN
Warehouse clerk performs similar controls
Recording of purchases
Risks
Fictitious purchases recorded in acc records
Purchases are erroneously duplicated
Amts on invoices are inaccurately recorded
Goods received but purchase not recorded
Controls
Creditors clerk matches the invoice sent by supplier to corresponding GRN, DN & PO
Creditors clerk reperforms casts, extensions & calculations
Clerk signs invoice
Another employee ensures timely & accurate recording in records
Monthy reconciliations, reviewed by senior staff member
Payment Preperation
Risks
Amts prepared for pmt are incorrect
Fictitious suppliers identified for pmt
Duplicated/fictitious invoices
Loss of pmt discount
Controls
Unissued cheque books subject to strict stationery controls
Checque book issued in numerical sequence
2 senior staff sign for cheque
Cheque signatories to cancel supporting docs
Cheques made difficult to tamper
Cancel incorrect cheques
Payment & Recording
Pmts not made ito pmt docs prepared
Suppliers are paid but are not on pmt schedule
Amts paid do not agree w/ amts prepared
Pmts incorrectly recorded
Fictitious pmts
Cheques recorded in numerical sequence in CPJ
CPJ reviewed regualarly by senior staff for missing cheeques or unusuual pmts
Reconciliations