Chapter 7 - Purchase Systems Flashcards
What are some examples of ordering risks?
- Unauthorised purchases for personal use
- Goods/services not obtained on most advantageous terms
What controls are implemented to mitigate ordering risks?
- Company use only
- Authorised suppliers
- Orders should only be made at competitive prices
- Segregation of duties
What are examples of ordering tests of control?
- Review list of suppliers
- Cech orders are supported by purchase requisition
- Review security arrangements over blank orders
What are the risks associated with recording financial transactions?
- Misappropriated for private use
- Accepted but not ordered
- Invoices may not be recorded
- Full term of credit not taken advantage of
What are the controls implemented when recording transactions?
- Business use only
- Only accept if ordered
What are the tests of controls for invoices?
- Check records
- Check entries into payables ledger
- Verify credit notes
- Test numerical sequence
- Obtain explanations for long term outstanding items
What are examples of payment risks?
- False invoices paid in error
- Invoices paid prematurely
- Payment incorrectly recorded
- Credits incorrectly recorded
- Payments recorded in wrong period
Where should all expenditure be recorded?
Nominal ledger
How many signatures are required on cheques?
2 min
If goods inwards are not checked, what is the most likely consequence?
Inferior quality of goods accepted
What is the ideal situation for purchase ordering?
Production department requisition materials
Orders placed by purchasing department with authorisation of purchasing director
what is the most likely consequence of a Purchase ledger clerks permitted to amend standing data on the payables master file?
Payments made to fictitious suppliers
What can result if records of goods are not kept?
Goods can be used for private purposes
What may happen if the payment listing produced by the accounting system is only read by the payments clerk?
Invoices may be paid at the wrong time
