U3, AOS 1 - KK13 - Internal Control Procedures

Question 1

Internal control procedures relating to management of Accounts Payable.

Answer 1

1. Separation of duties (for example):

• the person responsible for the ordering of inventory, should not be also responsible for making payments as this can lead to fraudulent payments.
• Person preparing the payment should not sign the cheques or process the electronic transfer (including having the passwords), this should be the owner/manager

2. Documentation is checked before any payments are made, there are order confirmation and order form, shipping and order confirmation, delivery dockets, purchase invoices that create a full audit trail.

• Order form – a document issued by a business requesting the supply of inventory or other goods.
• Shipping and order confirmation – a document issued by the supplier and confirming the receipt of an order (for inventory) and its shipment.
• Delivery docket – a document issued by the supplier to accompany a delivery, listing the type and quantity of all items delivered.
• Purchase invoice – a source document used to verity a credit purchase of inventory or other items.

3. Passwords should be changed regularly.

Question 2

Internal control procedures relating to management of Inventory.

Answer 2

1. Check Order Form (issued by business) and Delivery Docket match (issued by supplier) to prevent under supply from supplier.
2. Complete a physical count on arrival to ensure number matches Order Form and Delivery Docket) to prevent under supply from supplier.
3. Complete physical count of inventory leaving the business to prevent over delivery to client, ensure matches order form from client if one exists.
4. Hire an Inventory Manager and make it their responsibility to ensure correct processes are followed.
5. CCTV in storeroom to discourage theft.Preventative measures such as locks to prevent theft.