Purchases System

Question 1

Which two of the following control activities are most likely to reduce risk of payments being made twice for the same liability?

A. Stamping ‘paid’ on invoices that have been paid
B. Prompt dispatch of cheques
C. Authorisation of payments
D. Checking supplier statements before payments are made

Answer 1

A and C

Question 2

The auditor of Sunny Plc has identified that there is no procedure to track purchase invoice due dates.

Which of the following is the most likely consequence which might arise as a result of that deficiency?

A. Prompt payment discounts may not be obtained
B. Goods not actually received may be paid for
C. Inferior goods may be purchased
D. Payments may be made ti fictitious suppliers

Answer 2

A

Question 3

Is the following relating to Ordering, Recording Invoices, or payment?

Orders are only made to authorised suppliers

Answer 3

Ordering

Question 4

Is the following relating to Ordering, Recording Invoices, or payment?

Liabilities are recognised for all goods and services received

Answer 4

Recording Invoices

Question 5

Is the following relating to Ordering, Recording Invoices, or payment?

Orders are made at competitive prices

Answer 5

Ordering

Question 6

Is the following relating to Ordering, Recording Invoices, or payment?

All expenditure is authorised

Answer 6

Payment

Question 7

Is the following relating to Ordering, Recording Invoices, or payment?

Cut-off is correctly applied

Answer 7

Recording Invoices

Question 8

Is the following relating to Ordering, Recording Invoices, or payment?

Goods and services are only accepted if there is an authorised order

Answer 8

Recording Invoices

Question 9

On which purchase documentation should there be a numerical sequence check?

Answer 9

Purchase requisition
Purchase orders
Purchase invoices
Goods received notes
Goods returned notes

Question 10

Why is the numerical sequence on GRNs checked?

Answer 10

Sequence provides a control that purchases are completely recorded

Missing documents should be explained, or cancelled copies available, otherwise the implication could be that goods have been received but not matched with invoices. This would mean that the liability in respect of that invoices is being omitted.

Question 11

What are the tests to be performed on the cash payments book?

Answer 11

1. Compare with paid cheques to ensure payee agrees
2. Note that cheques are signed by person authorised to do within their authority limits
3. Check to suppliers’ invoices for goods and services. Verify that supporting documents are signed as having been checked and passed for payment and have been stamped ‘paid’.
4. Check to suppliers’ statements
5. Check to other documentary evidence, as appropriate (agreements, authorised expense vouchers, wages/salaries records, petty cask books, etc.)