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  • Internal Control Weaknesses

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    Rosaly Jadraque
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    The document discusses internal control weaknesses in a company's purchasing system. It identifies issues such as a lack of independent verification of purchase orders and invoices, suppliers being selected based on reputation rather than important factors like price and delivery time, and no segregation of duties among staff. It provides recommendations like having a second person check all documents, selecting suppliers based on multiple criteria, and ensuring all goods are received and recorded properly. Overall, the purchasing system needs improvement to accurately track purchases and prevent errors.

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    Internal control

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    Internal control weaknesses

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    The document discusses internal control weaknesses in a company's purchasing system. It identifies issues such as a lack of independent verification of purchase orders and invoices, suppliers being selected based on reputation rather than important factors like price and delivery time, and no segregation of duties among staff. It provides recommendations like having a second person check all documents, selecting suppliers based on multiple criteria, and ensuring all goods are received and recorded properly. Overall, the purchasing system needs improvement to accurately track purchases and prevent errors.

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    © All Rights Reserved
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    232 views3 pages

    Internal Control Weaknesses

    Uploaded by

    Rosaly Jadraque
    The document discusses internal control weaknesses in a company's purchasing system. It identifies issues such as a lack of independent verification of purchase orders and invoices, suppliers being selected based on reputation rather than important factors like price and delivery time, and no segregation of duties among staff. It provides recommendations like having a second person check all documents, selecting suppliers based on multiple criteria, and ensuring all goods are received and recorded properly. Overall, the purchasing system needs improvement to accurately track purchases and prevent errors.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 3

    Internal control weaknesses

    Purchase system

    A purchasing system is a process for buying products and services encompassing purchase from
    requisition and purchase order through product receipt and payment. Purchasing systems are a key
    component of effective inventory management in that they monitor existing stock and help companies
    determine what to buy, how much to buy and when to buy it. Internal Control weaknesses that can be
    identified in current purchasing system are as follows:-

    The clerk need to check the amount and quantity of goods with its supporting document to ensure its
    accuracy.

    When selecting vendors it should be based on the past reputation and not on other important factors
    such as prices, terms and delivery time.

    Manually preparing receiving reports subject to more errors.

    There should be a second officer to double check all the invoices, reports and orders made by clerk.

    As the clerk is doing many work there is no segregation of duties.

    1. Daily report from Purchasing Department on accounting the sequence of pre-numbered purchase
    requisitions and orders with corresponding delivery docket to make sure all have been purchased and
    arrived.

    2. Procedure on supplier’s selection must be based on quality, prices, terms and delivery time.

    3.Daily report from Goods Inward Clerk on accounting the sequence of delivery dockets with
    corresponding Receiving Report Document to determine what items have been received and not.

    4.Inspection Clerk’s signature must be evident on each Delivery Docket and its corresponding Receiving
    Report Documents signifying that all items received are in good condition. Written report on any items
    received with damages and defects must be provided to Purchasing Department to contact the suppliers
    to settle the issue.

    Purchases System:

    Not independently checked with stock against the purchase requisition which may result to over stock.

    Sequence of the orders is not accounted including the cancelled orders which may result to misplaced
    orders and no purchase transaction occurs.

    Suppliers are selected based on the past reputation and not on other important factors such as prices,
    terms and delivery time
    All incoming goods including fixed assets are not cleared through a goods inwards / receiving
    department.

    The Major Weaknesses

    1. No written credit authorization.

    2. Only subject to a thorough examination if account is overdue.

    3. No Evidence that all deliveries are made to customers.

    4. No internal check over accuracy and validity of invoice details.

    5. No independent check to the validity of complaints are handled by sales order check.

    6. Failure by management or those charged with governance to assess the effect of a significant
    deficiency previously communicated to them.

    May be next time two persons need to check the credit several time on a formal and regular basis. The
    credit must have a limit to be affecting the financial in the company .Need to control the credits that are
    given to the customers. All the deliveries need to have records for examples dockets or computerized.
    Used dockets or an electronics dockets so that the customers could sign and the staffs can verified and
    entered all the records on the computer or do filling. Any credit arising from the complaints must be
    authorized by the sales manager it will minimize the chance of unexpected events. Maintaining accurate
    and complete reports requires by legislation. Management and minimizing time lost correcting errors
    and ensuring resources are correctly and efficiently allocated. All records and transactions are included
    in the reports of business and the right amounts are recorded in correct amounts.

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