Purchases System Flashcards
Order placed: Key risks
Goods+Services not good enough quality or value for money
Unauthorised purchases for personal use
Order placed: Key control objectives
Purchases only from approved suppliers
Competitive prices
Only for valid business reasons
Order placed: Key control activities
New suppliers authorised by management
Evidence required for need for purchase before authorisation
E.g. inventory level checked
Sequentially numbered order forms
Authorisation of order forms by manager
Central purchasing department
Or maintenance of approved supplier list
Goods received: Key risks
Goods not ordered accepted
Receipts not recorded
Goods misappropriated
Goods received: Key control objectives
Only goods ordered by company accepted
All receipts recorded
Stored securely
Goods received: Key control activities
Examine goods inwards for quantity, quality and condition
Agree to PO
Numbered goods received notes
Match and follow up unmatched GRNs
Physical controls over stores
Raise sequentially numbered returns note for all rejected/returned goods
Invoice received: Key risks
Not received
Not correct
Invoice received: Key control objectives
Ensure details are correct
All credit notes entitled claimed
Invoice received: Key control activities
Match invoice details to GRNs
Arithmetic checks on supplier invoices
Claim credit notes for all goods rejected/returned
Follow up unmatched return notes
Purchase recorded: Key risks
Not recorded
Recorded where no receipts
Purchase recorded: Key control objectives
All valid purchases recorded
Correct amount
Correct period
Purchases recorded in correct supplier account
Purchase recorded: Key control activities
Match cash payments to invoices
Compare monthly supplier statements to payables ledger balances
Reconciliation of purchase ledger with nominal ledger
Cash paid: Key risks
False invoices paid
Not recorded at correct amounts
Incorrect supplier account (disputes)
Cash paid: Key control objectives
Payment only made for goods received
Only pay valid expenditure
Made once
Recorded correctly
Cash paid: Key control activities
Segregation of duties:
Custody of cash/cheque books
BACS transfer
Recording payments
Only approved after checking supporting documentation
(E.g. invoices matched to GRNs)
Invoices labelled as paid (to avoid duplication)
Appropriate limits set on amounts that can be authorised
(E.g. require 2 signatures)
Compare monthly supplier statements to payables ledger balances
