Chapter 7 Purchases system

Question 1

Purchases system

Answer 1

Key risks Key control and objectives Key control activities
Order placed Goods poor value, personal use of purchases Purchases from approved suppliers, only made for business use Management authorise new suppliers, evidence required for authorisation, central purchasing department or an approved supplier list
Goods received Accepted goods when not ordered, receipts not recorded, goods misappropriated All receipts recorded; goods stored securely Goods examined, record goods on GRN which match invoices, physical controls over stores
Invoice received Invoice not received and incorrect Ensure the details are correct, all credit notes claimed Match invoices to GRNs, claim credit notes and follow up on unmatched return notes
Purchase recorded Purchases not recorded All valid purchases recorded Match cash payments to invoices, reconciliation of purchase and nominal ledger
Cash paid False invoices paid; payments not recorded Payment only made for good received, valid expenditure paid, payments recorded correctly Segregation of duties, compare monthly supplier statements to payables ledger balances