7 - Purchase systems

Question 1

What are the 4 stages of a purchase system?

Answer 1

A purchase order is raised - Purchase order document
The goods are received by the company - Goods received note
A purchase invoice is received from the supplier - Purchase invoice document

Question 2

What are the controls in place for a purchase order being raised?

Answer 2

Purchase orders are created on pre-numbered, sequential forms that are authorised by responsible officials.
Approved supplier lists are maintained with authorised suppliers (restricted access)
If no authorised supplier exists a tender process is started

Question 3

What are the controls in place for a good being received by the company?

Answer 3

A pre-numbered sequential goods received note (GRN) is raised when goods received and matched to the original purchase order to check the quantity and validity.
Goods are checked for quality on receipt and returned if substandard.
Inventory system is updated so goods are available for sale

Question 4

What are the controls in place for a purchase inovice?

Answer 4

A purchase invoice is received from the supplier. It is matched to the GRN and PO to ensure the invoice contains correct quantity and price. Supplier statements received should be reconciled to the payable ledger to ensure all invoices are complete.

Question 5

What are the controls in place for a purchase invoice being paid?

Answer 5

Payments are authorised by responsible official prior to payment.
The purchase ledger is updated promptly, or invoices are stamped “PAID” to prevent paying twice. Due dates of invoices are monitored to avoid interest or missing early payment discounts